Rather than acting as product providers, the wealth management industry is positioning itself as a source of financial solutions and advice, according to PwC's 2013 Global Private Banking and Wealth Management Survey, released late Wednesday.
PwC surveyed 200 participants from 51 countries for the report. The majority of respondents were from Europe and the Middle East, but 18% were from North and South America. This is the 20th anniversary of the biennial survey.
PwC identified five areas where wealth management firms need to enact transformative change to be successful.
1. Markets and Clients
While emerging markets are growing faster than developed markets, PwC found that even within that sector, newly emerging markets are experiencing more robust growth than more "established" emerging markets.
Steve Crosby (right), Americas leader for PwC's private banking and wealth management team, said this "multi-speed market" means "different markets are growing, maturing and changing at different rates. In many cases, what used to be a correspondent institution may now be a local competitor."
As the demographics of a firm's client base change, wealth management firms need to stay "agile" in responding to their needs. For example, while women comprise a third of the client base, just 8% of firms have a specific strategy to meet those clients' needs.
Furthermore, the third most common reason clients leave a firm is that they are next-generation investors who want to replace their parents' advisor, the report found.
Crosby said that over time, firms have unintentionally "created models that seem to focus on the patriarch" and don't include surviving spouses, children or charitable foundations that their clients would like to leave their assets with. "As a result, assets are flying out the door," Crosby said. "If they address all the stakeholders, they would have a higher retention rate and they wouldn't have to keep reselling the same" plan to the same stakeholders.
Crosby said firms need to communicate with next-generation clients the way they want to be communicated with. "The next generation is what we call 'analog abhorrent,'" he said. "You have Facebook, you have Twitter, you have LinkedIn: You have different ways of communicating with the next generation. Most of the firms that are out there haven't quite gotten up to speed yet." 
2. Risk and Regulation
The increasing cost of regulation is a significant challenge facing the wealth management industry, the report found. In fact, global respondents estimated that regulatory costs will consume 7% of their annual revenue in the next two years, compared with 5% today. Respondents from the Americas predicted an even higher increase to 9% of their annual revenue.
Furthermore, PwC noted that for global respondents, compliance replaced maintaining a positive reputation as the top risk management concern.
"The problem with regulation in most cases, aside from the tonnage, is the nature of how it is promulgated," Crosby said, calling regulation "incomplete." When regulations are passed they frequently take effect in several phases. "It's hard to architect technology and business and solutions and people and everything else."
Another problem with some rules is that they "require a single view of the customer. To get to a single view of the customer, people need to be able to focus on the data. They need to see everything they've got globally."
3. Human Capital
4. Operations and Technology
