Trends in Wealth Management

To gain a distinctive view into the experiences of both customers and advisors as the wealth management industry faces change, Forbes Insights, in partnership with Temenos, surveyed more than 60 wealth managers all over the world and 35 High- Net Worth (HNW) clients about the evolving banking encounter —how they convey, their needs and the need for technology
One of the key findings:
• 42% of wealth managers believe that the mixture of offline and digital means of communication is perfect.
• 34% of HNW clients need either digital-only or a combination of offline and digital communication
• 62% of HNW customers say the digitization of wealth management services is good overall, but they nevertheless desire to meet regularly with the advisor.
• 17% of HNW customers say technology is not dispensable.
• 48% of HNW clients rate cyber threat and hacking as a top concern associated with the use of technology
• 45% of wealth managers believe comprehensive analysis of performance and financial results is the finest way to establish trust with clients.
The survey also affirms it is mainly a myth that young investors that are wealthy are entirely self sufficient and they convey mainly through virtual channels, with little or no interest in face-to-face relationships with advisors. True, they want to make their own decisions, and they are definitely at home in the digital world ; but they also need to work to validate their viewpoints, on the go, across any channel that is available and to get second alternatives.
Some other notable observations:
Investors over age 50 tend to be focused on the security of data when it comes to wealth management.
Understanding preferences and the feelings of clients on a deeply personal level is at the core of retention, the underpinning business object for the sector.
A substantial number (42%) of wealth managers surveyed consider that legacy systems are “somewhat of a difficulty. ”
Altering expectations of a younger generation of investors to wealth management will create opportunities. For example, it’s typical of Millennials, and also of some Xers and Boomers, to downplay expert guidance and believe in the ‘wisdom of their tribe.’ They also desire to engage in new ways: always and everywhere and through new combinations of digital and human -established channels. This has deep implications for every wealth management company. Additionally, the Xers and Millennials who command only about one-fifth of the states ’ retail assets today will command about half of them within the next 15 years. So the riches advisors who do business on their terms and can connect to young investors will have a leg up on future growth.
Innovation in wealth management will also come in the form of guidance that is holistic: consumers will search for advice beyond traditional portfolio allocation and performance standards into how you can achieve various life goals like healthcare, relocation, education, and leisure. This will necessitate access to broader bodies of knowledge and more comprehensive frameworks to incorporate advice across disparate targets.
We believe the Wealth Management sector is poised for significant innovation with regards to the use of analytics to support company objectives and better engage with consumers. In this respect, the sector is somewhat lagging behind other sectors (Retail, P&C) but will be catching up fast given considerable levels of investment being made in big data and sophisticated analytics capabilities.
Lastly, we see quite a few of startups dedicated to the democratizing of access to esoteric advantages categories (e.g., loans or choices) and institutional strategies or research tools. While some regulatory issues must be overcome (e.g., the definition of accredited investors), we expect to see continued innovation in this place.
Conclusions:
The changing expectations of the younger investor will create growth opportunities.
What are some measures businesses can take to address these challenges?
This really is not meant as an exhaustive list but rather a listing of especially significant – yet challenging – steps wealth management firms can require.
Embrace change: The status quo is not possible anymore: too many sources of disruption (in the the rise of robo guidance to a fresh generation of investors, new competitions, new regulations, etc.) are coming together to profoundly reshape the wealth management business going forward on (see our related report).
Build a culture of innovation: Most wealth management firms that are established are not very good at this. It is also about driving adoption through substantial bodies of counselors and product staff and providing empowering technologies. It is increasingly about prototyping and testing quickly.
Construct new capabilities that’ll drive differentiation in the market place: Examples include digital client engagement; digital, slick onboarding process integrated with KYC; big data management and advanced analytics; and segmentation of advisers and clients. For many companies, this really is likely to require purchases or partnerships to construct capacities that are required quicker. Wealth management firms don’t have a very strong track record here.
Match them with front-line and fix to the evolving demographics of investors staff: This is crucial that you help businesses stay in tune with their customers’ tastes.
Anticipate and prepare the upcoming retirement tide by boomers: Boomers must consider their longevity demands and risks many years before retirement age. Their advisors have to find new methods to participate with them on this issue on. Gamification may be part of the solution in wealth management area.
Eventually, for large diversified banks or asset managers with several coexisting advisory models under exactly the same corporate umbrella (for instance a digital robo offering, a traditional full service brokerage, and retail banking wealth management model), transition from a referral and migration paradigm to a collaboration one. This will be truly challenging to many firms and will demand potentially new pricing and relationship management models. But wealthy customers are requiring access to several advisory models at once.
THE STATE OF GLOBAL WEALTH MANAGEMENT — COMPONENT 1: right FOR TECHNOLOGY DISRUPTION
“If (wealth management advisors ) continue to work just how you have been, you may not maintain business in five years” – Business leader Joe Duran, 2015 TD Ameritrade Wealth Adviser Conference.
The wealth management segment is a possible high growth business for any financial institution. It’s the greatest customer touch section of banking and is fostered on long term and extremely successful advisory relationships. It’s also the ripest section for disruption due to a clear shift in expectations and client tastes for their financial future. This three-part series investigates the industry trends, business use cases mapped to technology and design and disruptive themes and strategies.
As it broadly refers to an aggregation of financial services there is no one universally accepted definition of wealth management. Included in these are financial advisory, personal investment management and planning disciplines directly for the advantage of high- net-worth (HNW) clients. But wealth management has also become a highly popular branding term that advisors of many different kinds increasingly embrace. So this term now refers to a broad range of business models and potential functions.
Trends associated with shifting customer demographics, evolving expectations from HNW customers regarding their needs (including driving societal impact), technology and tumultuous rivalry are converging. Paradigms and new challenges are afoot in the wealth management space, but on the other side of the coin, so is a lot of opportunity.
A wealth manager is a specialized financial advisor who advises on how exactly to prepare for present and future financial needs and helps a client construct an entire investment portfolio. The investment part of wealth management normally entails the selection of individual investments and also both asset allocation of a portfolio that is whole. The planning function of wealth management often incorporates estate planning for people as well as family estates as well as tax planning around the investment portfolio.
There is absolutely no trade certification for a wealth manager. Several titles are commonly used such as advisors, family office representatives, private bankers, etc. Many of these professionals are certified CFPs, CPAs and MBAs too. Authorized professionals are also sometimes seen augmenting their legal expertise with these certifications.
State of Global Wealth Management
Private banking services are delivered to high net worth individuals (HNWI). These are the wealthiest clients that demand the highest levels of service and more customized product offerings than are provided to frequent customers. Usually, wealth management is a subsidiary company of a larger investment or retail banking conglomerate. Private banking also includes other services like tax and estate planning planning as we shall see in several paragraphs
The World Wealth Report for 2015 was published jointly by Royal Bank of Scotland (RBS) and CapGemini. Notable highlights from the report include:
1. Nearly 1 million people in the world achieved millionaire standing in 2014
2. The collective investible assets of the world’s HNWI totaled $56 trillion
3. By 2017, the entire assets under management for worldwide HNWIs will climb beyond $70 trillion
4. Asia Pacific has the world’s highest number of millionaires with China and India posting the greatest rates of growth respectively
5. North America was a close second at 8.3%. Both regions surpassed for high net worth wealth
6. Equities were the favored investment vehicle for global HNWI with cash deposits, real estate and other alternative investments forming the remainder
7. The HNWI population is also tremendously credit favorable
This slower pace of increase now means that companies should move to a more relationship centric model, particularly among highly enviable segment : younger investors. The report stresses that now wealth managers are not able to serve different needs of HNW clients from both a mindset, business offering and technology ability perspective under the age of 45.
THE COMPONENTS OF WEALTH MANAGEMENT BUSINESS
As depicted above, services are broadly provided by full-service wealth management companies in the following areas :
Investment Advisory
A wealth manager is a private financial advisor who helps a customer assemble an investment portfolio that helps prepare depending on time horizons and their respective danger desires.
Retirement Planning
Retirement planning is an obvious function of a customer ’s private financial journey. From a HNWI perspective, there is certainly a need to supply retirement services that are complicated while balancing taxes, income needs, estate prevention and so on.
Estate Planning
A key function of wealth management is always to help customers pass on their assets via inheritance. Wealth managers help construct wills that leverage trusts and kinds of insurance to help ease inheritance that is smooth.
Tax Preparation
The skill to reach the right mix of investments from a tax perspective is a capability that is key.
Full Service Investment Banking
For refined institutional customers, the ability to offer a raft of investment banking services is an incredibly appealing capability.
Insurance Management
A wealth manager needs to be well versed in the sorts of insurance bought by their HNWI customers so that the hedging services that are appropriate can be put in place.
Institutional Investments
Some wealth managers cater to institutional investors like pension funds and hedge funds and offer a number of back office functions.
It really is to be noted that the wealth manager is not always a professional in all these places but rather operates nicely with the various places of an investment firm from a preparation, tax and legal perspective to ensure that their clients can accomplish the results that are greatest.
Customer Preferences and Trends
There are not unclear changing preferences on behalf of the HNWI, including:
1. The wealth management community is mostly missing the younger customer ’s needs, while powerful satisfaction scores were given by elderly customers to their existing wealth supervisors.
2. Regulatory and price pressures are growing leading to commodification of services
3. Innovative automation and usage techniques of data assets among new entrants (aka the FinTechs) are leading to the rise of “roboadvisor” services which have already begun disrupting existing players in a massive manner in certain HNWI segments.
4. A need to offer holistic financial services tailored to the behavioral needs of the HNWI investors.
Technology Trends
There has been an understanding that other regions have been trailed by wealth management as a sub sector from a technology and digitization perspective. As with banking organizations that are wider, the wealth management company has been under considerable pressure from the perspective of technology and the astounding pace of innovation seen over the last few years from Big Data, a cloud and open source standpoint. Here are a couple trends to keep an eye on:
1. The dependence on the Digitized Wealth Office
The younger HNWI customers (defined as under 45) use cellular technology as an easy method of socializing with their counselors. A large proportion of applications are still individually managed with distinct user experiences which range from customer onboarding to trade management to servicing. There is a crying demand for IT infrastructure modernization ranging to Big Data to micro across the sector from cloud computing -services to agile customs boosting techniques such as for instance a DevOps approach.
2. The requirement for Open and Smart Data Architecture
Functions that were siloed have led to siloed data architectures working on custom built legacy applications. All of which positively impacts the client experience and inhibit the programs from using data in a fashion that always. There exists certainly a demand to do more with existing data assets and to have an integrated digital experience both internationally and regionally. Current players possess a huge first mover advantage as they offer exceptionally established financial products across their large (and largely loyal and tacky ) customer bases, a wide networks of physical locations, and rich troves of info that pertain to customer accounts and demographic info. … .. Nonetheless, it isn’t enough to just have the info. They must manage to drive change through heritage thinking and infrastructures as things change around the entire industry as it struggles to adapt into a major new section (millennial customers) who increasingly use mobile apparatus and require more contextual services and a seamless and highly analytic- driven, unified banking encounter —an experience similar to what consumers typically experience via the Internet on net properties like Facebook, Amazon, Google, Yahoo and so on. … ..
3. Thee need for more  automation
The need to invent a closer banker/client experience is not just driving demand around data silos and streams themselves. It’s driving players to move from paper based models to highly automated model, digital and a more seamless to rework countless existing rear and front office processes —the weakest link in the chain.
4. The Demand to “Right- size” or Change Existing Business Models predicated on Opinions and Customer Preferences
The clear continuing subject in the wealth management space is constant innovation. Firms have to ask themselves if they’ve been offering the appropriate products that cater to an increasingly affluent yet dynamic clientele.
Judgment
The following post in this string will concentrate on the company lifecycle of wealth management. We’ll begin by describing granular use cases across the whole lifecycle from a company standpoint, and we’ll then examine the pivotal role of Big Data empowered architectures along with a fresh age reference design.
In the final and third post in this string, we round off the discussion using an examination of strategic business recommendations for wealth management firms —recommendations which I will consider will drive astounding business advantages by providing a first-class customer experience and finally innovative offerings.
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