Asset managers have been warned that increasing the amount they spend on bolstering their operations in Europe could dent longer-term profits — if they fail to win new clients.

According to a report from consultancy McKinsey, overall expenses for European investment management firms were up almost 5% year on year at the end of 2017, compared with a 3% increase in assets over the same period. This is despite a 56% rise in revenues last year and average profit margins of 37%.