Against a backdrop of sweeping digitalisation in wealth management, we explore the key trends most important to investors that came to the forefront during 2022.
- Investors are willing to pay more for a personalised service driven by the right technology.
- Both advisor-led and hybrid investors greatly value recommendations from advisors as their top source of reliable information.
- Opportunities and innovations such as ESG, cryptocurrencies, tokenised assets and non-fungible-tokens (NFTs) are just a few of the areas that wealth firms need to understand and incorporate into their strategies in order to differentiate and provide value.
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Personalisation is an expectation
With ongoing change within the wealth arena this year, the role of the wealth advisor and personalisation in wealth management remains more relevant than ever.
When it comes to imagining the role of data in wealth management, it can be interesting to picture it as the nucleus, around which everything evolves, and the critical insights that come from that data are atoms.
While this is an abstract way of talking about data, it emphasises the importance of understanding our customers, their differences, or in keeping to this analogy, their DNA.
Now, more than ever, wealth advisors have the tools and capabilities to avoid a one-size-fits all approach to managing multiple client portfolios.
In our Global Wealth report this year, we found that 64 percent of millennials and 51 percent of investors aged 35-54 are willing to pay more for personalised investing products and services.
And this ties closely with the relevance and importance of the wealth advisor in an investor’s journey, as 38 percent of millennial investors attach the most value to wealth advisors as a reliable source of investment advice.
Here wealth management firms have a real opportunity to make sure they are equipped with the high-quality data required to drive secure financial outcomes.
The human touch, through a digital experience.
Digital engagement is now non-negotiable in the wealth industry, and this presents a valuable opportunity for wealth managers who leverage digital innovation and evolve their offerings.
There is great demand for mobile apps when accessing account information. Nearly half (46 percent) of all investors say they access account information via a mobile app, and this figure rises sharply to 72 percent among millennial respondents.
This year, we have seen mobile engagement take centre stage as investors desire easy, on-the-go access to portfolio information, real-time data, trading tools, tax documents and more.
Going forward, wealth advisors should continue to leverage these tools to differentiate themselves in this highly competitive environment.
When asked which sources of investment information are seen as being the most valuable, we found that 58 percent of all advisor-led investors and 62 percent of all hybrid-advisor and self-directed investors view “advisor recommendations” as their most reliable source.
Increased demand for alternative investments
This year also saw the growing interest in alternative investments, and how wealth management firms are integrating them into their strategies.
Wealth firms must go beyond only offering traditional investment options to their clients. Opportunities and innovations in areas such as sustainable investing (ESG), cryptocurrencies, tokenised assets and non-fungible-tokens (NFTs) are just a few of the areas that wealth firms need to understand and incorporate into their offerings to differentiate, provide value and remain relevant.
Leading the way is the demand for high-quality ESG data, as we’ve witnessed growing numbers of investors who are seeking to align their purpose or values with their investment decisions. In addition, many more are taking the time to understand how their funds impact corporate decision-making and not just their portfolios.
In fact, ESG metrics are now viewed on par with traditional financial metrics when evaluating corporate performance for investments.
Investors increased understanding of ESG is a key factor influencing this increased interest in ESG.
Fifty percent of respondents in our latest wealth report survey indicated that they are more willing to consider ESG now because they have a better understanding of the impact of these investments. Drilling down, the research further reveals that enthusiasm in this crucial area rises to 61 percent among millennial investors.
In the past, the prevailing mindset was that ESG investing was a limiting factor – one that screened out part of the universe of opportunity or at best ticked the box of corporate altruism.
This perception has steadily evolved and as a result, many wealth industry participants now differentiate their services using ESG criteria. This trend shows no sign of abating, and we expect ESG-related considerations to have ongoing and ever-greater implications for the wealth industry.
While providing every customer with every innovation and investment type will not be the best path forward for all wealth firms, understanding these innovations, will set them up for success.
The available universe of investment options will continue to grow, and successful firms must reposition themselves and evolve their strategies to ensure they meet an ever-growing demand for these must-have alternatives and as a result, drive their added value.
What’s in store for 2023?
Looking ahead to 2023, the current market environment is shaping how wealth and asset management firms work with investors and what investors expect from the firms. The importance of offering personalisation, digital capabilities, and alternative investments will continue to increase in importance.
With the right data and value-added insights, every advisor and every investor can make better decisions that positively impact portfolio performance, while contributing to a more sustainable future for all stakeholders.
Importantly, amid these changes, the role of a trusted wealth advisor to help retail and private investors navigate new opportunities will be more important than ever.