In its December 2014 Quarterly Outlook, Morningstar said Australian asset managers will continue to benefit from the strength in global financial markets.
Increasing flows, courtesy of Australia's compulsory superannuation system, will also play an important role, said the report.
"The sector's inherent leverage to equity markets creates earnings volatility, however – but long-term industry fundamentals remain attractive.
"Growth in the domestic asset pool is supported by mandated superannuation, longer life expectancy, later retirement ages, greater focus on building adequate retirement savings, and population growth," Morningstar said.
Provided equity markets do not slump, the higher level of funds under management going into 2014/2015 should deliver wealth managers with another year of strong earnings growth, the report said.
"The cost base of the wealth managers is relatively stable, enabling significant operating leverage when funds under management increase, as is currently the case," Morningstar said.
Competition in the funds management industry is putting downwards pressure on management fees, but growth in assets under management should still see wealth managers achieve solid profit growth, said the research house.
"Asset managers that have built a strong reputation and investment track record, such as Platinum Asset Management and Magellan Financial Group, should find it easier to justify and maintain fees," it said.
Internationally-focused wealth managers (such as Henderson, BT Investment Management, Magellan Financial Group and Platinum Asset Management) are also doing well, benefiting from increasing inflows, equity market gains, performance fees and the benefits of a weaker Australian dollar, said Morningstar.
"Despite our positive outlook for the sector, strong share price growth during the past two years sees most wealth managers fairly valued," the report said.
"Our long-term preference remains internationally focused Platinum Asset Management and Magellan Financial Group, which are both well placed to benefit from global equities demand from Australian retail investors," Morningstar said.
"We continue to believe more Australian fund managers should diversify globally, a view which is shared by Perpetual which launched an internally managed global equities fund in August 2014," it said.
