Asset managers are navigating one of the most significant transitions in decades as client demand evolves rapidly. According to McKinsey’s 2025 outlook on the asset management industry, investors at every level—from ultrahigh-net-worth families to mass-affluent retirement savers—are increasingly seeking exposure across asset classes. In particular, clients want access to private markets that historically have been the domain of institutional investors. This shift is fueling what McKinsey describes as “the great convergence,” a structural realignment where the distinction between traditional public-market strategies and alternatives is steadily eroding.
For wealth advisors and RIAs, the implications are profound. Your clients are part of this demand shift, and asset managers—both global giants and niche players—are racing to respond. 2024 and 2025 have already seen headline-grabbing moves from firms like BlackRock and Fidelity, which rolled out new public-private partnerships and alternative products designed to broaden investor access. McKinsey warns, however, that these are only early steps. Many smaller firms remain on the sidelines, suggesting that convergence is still in its opening phase. Advisors who get ahead of the curve will be better positioned to deliver strategies that resonate with client expectations.
Yet the story is not as simple as demand outpacing supply. Private markets themselves are showing signs of strain. After years of uninterrupted growth, fundraising has slowed. In 2021, private markets raised $1.7 trillion globally. By 2024, that figure had fallen to $1.1 trillion. Fundraising declines varied across asset classes: infrastructure dropped 6% year-over-year, private debt slid 18%, real estate contracted 30%, and private equity fell by 25%.
This slowdown creates both challenges and opportunities. For institutional alternative managers accustomed to capital inflows from pensions, endowments, and sovereign wealth funds, the environment has become more competitive. But the pullback from institutions is precisely why many managers are targeting retail investors and retirement accounts. For advisors, this creates a fresh opening to bring alternative exposures to clients in ways that were not available a decade ago. The democratization of private markets could extend the growth cycle, even as fundraising dynamics shift.
McKinsey’s research highlights four additional themes shaping the future of wealth and asset management. Each one carries direct implications for advisors and the strategies you design for clients.
1. Regional loyalty is reshaping global allocations
For much of the past two decades, U.S. markets attracted disproportionate inflows from global investors. That dominance has begun to weaken. McKinsey notes that in 2024 and 2025, European investors aggressively reduced U.S. equity and fixed-income exposure, reallocating closer to home. American investors, by contrast, stayed largely committed to U.S.-based strategies.
The result is what McKinsey terms a “local-for-local” trend. Asset managers are increasingly raising capital from domestic investors to allocate toward domestic markets. This does not mean globalization is dead, but it suggests a recalibration toward regional alignment. For advisors, the message is clear: clients are looking for managers who understand their home markets and can deliver region-specific strategies. Positioning your practice to incorporate local market opportunities—whether through active management, ETFs, or alternatives—could prove especially compelling for clients who value proximity and familiarity in uncertain times.
2. Active ETFs are moving firmly into the mainstream
The ETF space continues to transform, and advisors should be watching closely. Over the past five years, more than 1,400 active ETFs have launched globally. While active ETFs still represent only about 7% of total ETF assets, they have captured disproportionate investor interest, pulling in 37% of flows and accounting for nearly a quarter of industry revenue.
McKinsey cautions that roughly half of these flows may simply represent migration from mutual funds rather than entirely new demand. Still, the trend is unmistakable: active ETFs are no longer niche vehicles. For RIAs, this creates both challenges and opportunities. The challenge is understanding how active ETFs compare against traditional active funds in terms of liquidity, fees, and performance persistence. The opportunity lies in positioning active ETFs as part of a broader toolkit, giving clients flexible, tax-efficient vehicles that combine elements of active management with the structural advantages of ETFs. Advisors who can articulate these benefits will be well-positioned to capture flows as the product set expands.
3. Global AUM has surged to record highs
Despite mixed headlines about fundraising and market volatility, the asset management industry posted extraordinary growth in 2024. Total global assets under management (AUM) hit a record $135 trillion by year-end, up $14.5 trillion from the prior year. While much of the increase was attributable to capital appreciation, net new flows added a meaningful $4.4 trillion.
Geographically, Asia stood out with the strongest relative inflows—8.4% of beginning-of-year AUM—while Europe also showed a notable rebound after years of sluggish performance. For advisors, this highlights the importance of thinking globally even as clients tilt local. Exposure to Asia-Pacific growth remains an attractive long-term allocation theme, while Europe’s turnaround may offer tactical opportunities. Early data for 2025 suggests growth is on track to mirror 2024, reinforcing the notion that investor appetite remains resilient despite pockets of caution.
4. Revenue growth is being offset by rising costs
Record AUM translated into record revenue for the industry in 2024, with firms generating $250 billion, up 10% from the prior year. But revenue growth has not translated directly into higher profitability. Pretax profit margins expanded only one percentage point, reaching 33%.
The culprit: rising costs. Asset managers are facing expense pressure on multiple fronts. As firms broaden their product lineups to include alternatives, ETFs, and cross-border offerings, they are required to build out distribution channels, regulatory compliance frameworks, and support teams. At the same time, technology costs are mounting. Many managers are still operating on outdated platforms that were not designed to accommodate today’s complex mix of asset classes and investor types. For advisors, this matters because cost pressure can affect everything from product pricing to service quality. It also underscores the need to vet managers carefully, ensuring they have the operational and technology infrastructure to deliver consistent performance and reporting.
What it means for advisors and RIAs
Taken together, these insights point to a future where convergence, innovation, and cost pressures reshape the industry. Advisors who recognize these shifts can turn them into competitive advantages.
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Client expectations are rising. The demand for private market exposure is not limited to institutional clients anymore. Affluent and mass-affluent investors increasingly expect their advisors to deliver access to private credit, real estate, and infrastructure opportunities.
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Product selection is expanding. With the rapid growth of active ETFs and hybrid public-private offerings, the product landscape is more dynamic than ever. Advisors must stay educated on structures, liquidity, and tax efficiency to guide clients effectively.
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Regional nuance matters. Clients are leaning toward home-market strategies. Advisors can position themselves as trusted local experts while still offering selective global diversification.
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Manager due diligence is critical. Rising costs and technological challenges mean that not all managers are equally prepared for the industry’s new complexity. Advisors who can distinguish between robust and vulnerable firms will protect clients from potential disruptions.
For RIAs, the bottom line is that the industry is entering a new era. The convergence of public and private markets is not a passing trend; it is a structural evolution that will reshape how portfolios are constructed. Advisors who embrace this evolution—balancing innovation with discipline, and global perspective with local sensitivity—will be better positioned to create durable value for clients.
McKinsey’s findings underscore both the promise and the challenges ahead. Asset managers are innovating rapidly, but the environment is competitive, and cost structures are tightening. For advisors, the role is not just to react but to anticipate—connecting clients to opportunities that align with their goals while navigating the risks inherent in a transforming marketplace.
In this environment, staying informed and agile is the true differentiator. The advisors who thrive will be those who can translate industry shifts into practical, actionable strategies that resonate with clients today while laying the groundwork for tomorrow.
