As economies around the world take twists and turns amidst political, geographical, technological, and social transformations, one thing is for sure – Change. Yes, the inevitable that surreptitiously unmasks itself even before you realise its existence.
Considering evolution as the underlying factor for our growth, it would only be fair to consider these up and coming trends, shaping the workstyle of finance and wealth management industry, are here to make matter more interesting than we projected.
Needless to say, the competition is now more intensified than ever. Retail banks and financial institutions looking for new growth opportunities are tapping new technology and business models; however, amidst prevailing financial crisis, more firms and more advisors have entered into a fray for the same segment of clients. Adding to the competition is entry of nonfinancial players in the market, which saw a surge of 20% until last year. With business giant like Google planning to make way into the wealth management arena, it’s definitely going to be more cut-throat than ever.
Close to $58.1 trillion is expected to move from one adult population to the next, over a period of 55 years, from 2007-2061. This huge transition in process is certainly causing paradigm shifts in the wealth management landscape. Assets will change both owners and advisors, hence, bringing about a massive change in existing client/advisor relationships.
As the WM workforce will retire, so will their existing set of clients. Millennials taking over their preceding generation of Baby Boomers will change the demographic equation quite significantly.
Further, with more women taking control of assets by virtue of financial and social independence, will add to the new demography.
Yes, there’s a new wave of expectations on the table. Thanks to new-age millennial thinking that believes in and demands transparency and control over their investment (both long term and short term). Such clarity in expectations is paving way for goal-based financial advice. It’s time, investment advisors shift focus from generic commoditized advising to more holistic consultation. This will reap sustainable benefit for both client and wealth managers. 90% Baby Boomers, 91% Gen X, and 93% Millennials consider fee structure as one of the determining factors in choosing a financial advisor.
This new breed of investors is vocal and non-hesitant about putting forth their desire for goal-based advice. Unfortunately, loyalty is not the only trait that will help the industry sail through.
The Digital Potential
The world is going gaga over digitalization, and there cannot be more emphasis on the need to incorporate the growing prevalence. Enhancing agility and making wealth management practices more efficient are few more reasons the industry should tap the technology to its advantage. 76% of investors agree that digital technology will not reduce the quality of advisor relationship.
It is therefore imperative that Incumbent wealth management firms build upon new technology for inculcating value-based collaborative relationships.
Remodelling Around Regulations
With risk regulations more stringent than ever, the wealth management industry needs to be more alert than ever. After all, the very foundation of this industry is based on trust. One intangible factor that can change the course of any business. Therefore, restructuring key areas of businesses to comply with regulatory norms will be a priority task for sure.