Financial services (4 of 5)

Asset and wealth management

About 9 minutes to read in full, or 1 minute for the short version belowFacts checked 30 September 2026

In one minute

Asset managers and wealth managers look after other people's savings, investing them in shares, bonds and other assets, and charge a small yearly fee on the money they manage.

The big idea: Revenue is assets under management (AUM) times the fee rate, so it rises and falls with markets as well as with new clients. Most costs are people and systems that do not grow with AUM, so scale brings high margins. The long shift from expensive active funds to cheap index funds keeps pushing the average fee down, which is behind most strategy cases in this industry.

One unit, in numbers: One active equity fund of EUR 1 billion: EUR 6,000,000 comes in, and EUR 2,100,000 (35%) is left after its own costs.What is left is the unit's contribution, before the costs of the whole company. See the worked example
Typical margin: About 30 to 40 percent operating margin for established managersRoughly how much of every 100 of sales (or income) is left as profit after the running costs. More on margin
Capital intensity: LowLittle money is tied up in buildings, machines or stock, so growing is cheap. More on capital intensity
The number to watch: Assets under management (AUM)The market value of the money a firm manages for clients. It is the clients' money, not the firm's.

Ask this first in a case

How much of AUM growth came from markets, and how much from net flows?

Words used above (4)

Assets under management (AUM):: The value of the money a firm manages for clients.
Net flows:: Money clients put in minus money they take out.
Active fund:: A fund that picks investments to try to beat an index.
Passive (index) fund:: A fund that simply copies an index, at a much lower fee.

The industry's other words are explained in Words to know (11).

On this page (17 sections)

How money is made

A yearly management fee as a share of AUM. In the US in 2025, investors paid on average about 0.05 percent on index stock mutual funds, about 0.64 percent on actively managed US stock mutual funds, and about 0.40 percent across all stock mutual funds.
Performance fees and a share of profits, mainly in hedge funds and private markets funds.
Private banks earn a mix of advisory and portfolio fees, interest on loans against client portfolios, and transaction fees, often about 0.6 to 1 percent of client assets in total; Julius Baer, a large Swiss private bank, earned about 0.8 percent in 2025.
Some large managers also sell technology: BlackRock earned about USD 1.1 billion from technology services and subscriptions in the first half of 2026.

Worked example: one unit

Unit economics means the money in and out for one unit of the business. Start from the revenue, take away the unit's own costs, and what is left is its contribution. More on unit economics

The unit: One active equity fund of EUR 1 billion, run for one year by a European asset manager. Illustrative, rounded figures.
Line	Amount	ShareShare of revenue
Management fee at 0.60 percent of assets	EUR 6,000,000	100%
Minus Portfolio managers, analysts and sales staff	EUR 2,000,000	33%
Minus Payments to banks, platforms and advisers who sell the fund	EUR 900,000	15%
Minus Fund administration, custody, data and technology	EUR 600,000	10%
Minus Office, compliance and other overheads	EUR 400,000	6.7%
What is left (contribution)	EUR 2,100,000	35%

Check: EUR 6,000,000 minus EUR 3,900,000 of costs leaves EUR 2,100,000.

So what: The fund keeps a 35 percent margin, in line with an industry that has stayed around or above 30 percent. The fee rate times AUM is the lever: if markets fall 20 percent, revenue drops by EUR 1.2 million while most costs stay, and the margin falls from 35 to roughly 20 percent; if the same money sat in an index fund at 0.10 percent, revenue would be only EUR 1 million and, with this active fund's costs, it would lose money. Index funds survive on tiny fees only because they need far fewer people and run at huge scale.

Key measures(9)

Key measures (also called KPIs, key performance indicators) are the numbers people in this industry track. Ask for the first one or two early in a case.

Assets under management (AUM)
The market value of the money a firm manages for clients. It is the clients' money, not the firm's. Glossary: Assets under management (AUM)
Typical: About USD 147 trillion worldwide in 2025; BlackRock alone about USD 15.3 trillion in June 2026[1]
Net flows (net new money)
Money clients put in minus money they take out: the real sign that clients are choosing the firm. Glossary: Net flows (net new money)
Organic growth rate
Net flows divided by AUM at the start of the period, which strips out market moves.
Fee margin (revenue margin)
Revenue divided by average AUM, in basis points (1 basis point is 0.01 percent).
Typical: About 5 basis points on US index stock mutual funds, 64 on active US stock mutual funds and 40 on all US stock mutual funds (2025); roughly 15 at BlackRock, whose AUM is mostly index funds and ETFs (its base fees divided by average AUM in the first half of 2026, calculated)[3]
Operating margin
Operating profit divided by revenue.
Typical: Industry margins have stayed around or above 30 percent since 2010; BlackRock about 38 percent on reported figures in the first half of 2026 (about 45 percent on its own adjusted measure)[1]
Cost to income ratio
Costs divided by revenue; the mirror of the operating margin. Glossary: Cost to income ratio
Investment performance
Return compared with the benchmark index, and the share of funds that beat it after fees.
AUM per relationship manager
Client assets looked after by one relationship manager: the core productivity measure in private banking.
Market versus flow split of AUM growth
How much of the change in AUM came from markets rising or falling, and how much from clients adding money.
Typical: More than 80 percent of the industry's revenue growth in 2025 came from rising markets[1]

First questions to ask

When a case lands in this industry, these questions get you to the numbers that matter.

How much of AUM growth came from markets, and how much from net flows?
What is the fee rate by product, and how is the mix moving between active, passive and private markets?
Who owns the client relationship: us, a bank, a platform, or an adviser?
Which clients: retail savers, wealthy families, or institutions such as pension and sovereign funds?
How much of the cost base is fixed, and how does the margin change if markets fall?

Value chain: where the margin sits

The value chain is the steps a product or service passes through, from the first supplier to the customer. Each step below shows how much of the value it keeps. More on value chains

Step 1: Savers and institutions hand over money to invest
Margin varies
Individuals, pension funds, insurers, endowments and sovereign wealth funds (such as Norway's fund, ADIA, PIF, GIC)
Large institutions negotiate low fees; individual savers pay more but cost more to reach.
Step 2: Advice and distribution: help clients choose and sell them funds
Fat margin
Banks, independent advisers, private banks, online platforms, and consultants who advise institutions
Whoever owns the client relationship takes a large share of the fee; in private banking the relationship manager is the business.
Step 3: Manage the portfolio (make the product)
Margin varies
Asset managers: BlackRock, Vanguard, Amundi, Fidelity, SBI Mutual Fund; private markets managers
Index funds earn tiny fees but huge scale; active and private markets funds earn much more per unit of AUM if they perform.
Step 4: Trade, hold and account for the assets (operations and custody)
Thin margin
Custodian banks such as BNY and State Street, fund administrators, and in-house operations teams
A scale business with low fees on very large volumes.
Step 5: Report to clients and keep them (client service)
Medium margin
Asset managers' client teams and private bank relationship managers
Keeping clients matters because fees repeat every year the money stays.

Profit pool: who keeps the money

Where in the value chain the profit ends up, which is often not where most of the sales are. More on profit pools

Profit sits where fees are high and clients are sticky: active specialists that perform, private markets funds, and wealth managers who own the client relationship. Index funds are a scale game where only the largest few earn well, and the ten largest providers have taken more than 90 percent of net inflows into US index funds and ETFs since 2015. Distribution keeps a large share of the fee wherever clients buy through banks and advisers.

Cost structure(5)

The main costs, each as a share of revenue (the money from sales).

Employee pay and benefits (BlackRock, first half of 2026, shares of revenue calculated from its income statements): About 33 percent of revenue[2]
Distribution and servicing costs paid to banks, platforms and advisers: About 10 percent of revenue[2]
Direct fund expenses (running the funds, such as index licences and administration): About 7 percent of revenue[2]
General and administration: technology, data, offices, marketing: About 10 percent of revenue[2]
Operating profit (what is left, after about 4 percent of other items such as amortisation, partly offset by a one-off accounting gain): About 38 percent of revenue[2]

Benchmarks(6)

Typical figures for the industry, to check a client's numbers against.

Global assets under management, 2025: About USD 147 trillion, up 11 percent[1]
Industry profit margin: Around or above 30 percent, flat since 2010 even as AUM tripled[1]Revenue grew about 5.1 percent a year from 2010 to 2025 while costs grew about 5.4 percent.
Average fees paid, US funds, 2025 (asset-weighted): About 0.40 percent for all stock mutual funds, 0.64 percent for actively managed US stock mutual funds, and 0.05 percent for index stock mutual funds[3]
Operating margin of the largest manager (BlackRock, first half of 2026): About 38 percent on reported figures (calculated); about 45 percent on BlackRock's adjusted measure[2]
Indian mutual fund AUM, August 2026: About INR 87 lakh crore (about INR 87 trillion; one lakh crore is one trillion rupees), with record monthly SIP inflows of about INR 32,300 crore (about INR 323 billion)[7]
Largest sovereign wealth funds (estimates): Norway about USD 2.3 trillion, ADIA about USD 1.1 trillion, PIF about USD 0.9 trillion[5]Some funds, including ADIA and GIC, do not publish their size, so rankings are estimates.

Typical cases(6)

Case prompts you might hear in this industry.

Our asset manager's profit margin is shrinking even though AUM grew. Why?
Should we launch a range of ETFs?
Should a global private bank grow in India or the Gulf?
Should a sovereign wealth fund manage more of its money in-house?
Should we buy a specialist private credit manager?
How should we use AI to cut our cost base?

Common traps(5)

Mistakes candidates make in this industry, and what to do instead.

Treating AUM as the firm's own money. It belongs to clients; the firm earns only the fee.
Counting market gains as commercial success. Only net flows show that clients are choosing the firm.
Forgetting mix: AUM can grow while revenue falls if money moves to cheaper products.
Ignoring key person risk: in active management and private banking, clients often follow the portfolio manager or relationship manager.
Assuming a sovereign wealth fund behaves like a private investor. It has a public mandate.

What changed, 2024 to 2026(6)

Recent changes a case could turn on.

Markets did most of the work: global AUM reached about USD 147 trillion in 2025, up 11 percent, but more than 80 percent of revenue growth came from rising markets rather than new client money.[1]
Scale keeps concentrating: BlackRock reported about USD 15.3 trillion of AUM at 30 June 2026, and BCG finds the ten largest providers have taken more than 90 percent of net inflows into US index funds and ETFs since 2015.[2]
Fees stay near record lows: US stock mutual funds charged about 0.40 percent and index stock funds about 0.05 percent on average in 2025, and actively managed stock funds lost money to withdrawals while cheap index funds drew most new money.[3]
AI is the new cost lever: BCG estimates managers could cut costs by 25 to 35 percent over three to five years if they redesign how they work. It is an estimate, not a result.[1]
India's retail savers keep investing monthly: SIP inflows hit a record of about INR 32,300 crore (about INR 323 billion) in August 2026, with more than 10 crore (100 million) accounts contributing.[7]
Sovereign funds are giant clients and investors: several manage around or above USD 1 trillion, and oil price swings in 2026 change how much new money Gulf funds receive.[5]

Players by region(7)

Well-known companies in each region. You do not need to learn them by heart; they help you picture the market.

Global: BlackRock, Vanguard, Fidelity, State Street (US)
Amundi (France)
UBS (Switzerland, wealth management)
Europe: Amundi
Allianz Global Investors, DWS (Germany)
Schroders, Legal & General (UK)
UBS, Julius Baer (private banks)
Norges Bank Investment Management (Norway's fund)
Middle East: Sovereign funds ADIA, Mubadala, ADQ (Abu Dhabi), PIF (Saudi Arabia), QIA (Qatar), Kuwait Investment Authority
Private banks in Dubai's DIFC and Abu Dhabi's ADGM
India: SBI Mutual Fund, ICICI Prudential, HDFC Mutual Fund
Wealth firms such as 360 ONE and the wealth arms of banks
National Investment and Infrastructure Fund
Southeast Asia: GIC and Temasek (Singapore sovereign investors)
DBS, UBS and Julius Baer in Singapore (private banking hub)
United States: BlackRock, Vanguard, Fidelity, State Street
Morgan Stanley, Merrill (Bank of America), JPMorgan (wealth management)
China: CIC (China Investment Corporation, sovereign fund)

Words to know(11)

Linked words have a fuller entry in the glossary.

Assets under management (AUM) (glossary entry): The value of the money a firm manages for clients.
Net flows (glossary entry): Money clients put in minus money they take out.
Active fund: A fund that picks investments to try to beat an index.
Passive (index) fund: A fund that simply copies an index, at a much lower fee.
ETF: Exchange-traded fund: a fund whose units trade on a stock exchange like a share.
Fee compression: The steady fall in average fees as money moves to cheaper products and clients push back.
Basis point: One hundredth of a percentage point: a fee of 40 basis points is 0.40 percent a year.
Relationship manager (RM): The private banker who looks after a group of wealthy clients.
Custodian: A bank that holds the fund's assets safely, separate from the manager.
Sovereign wealth fund (glossary entry): A state-owned investment fund, often built from oil income or reserves.
SIP: Systematic investment plan: a fixed amount invested in a fund every month, common in India.

Business model patterns

The ways of making money this industry follows. Spot the pattern in a new industry and you already know the first questions to ask.

Asset-light fees

Sources(7)

Facts checked on 30 September 2026. Worked examples are illustrative, shaped by these sources rather than one company's figures.

Go deeper and practise

Go deeper

The full lessons behind this brief, with sources and worked cases.

Practise it

Same pattern elsewhere

Industries that make money in a similar way. What you learned here carries over.