Wealth management has long had a lot of room to grow. This is because of things like rising family wealth, changing demographics, and the growing importance of being financially stable. The COVID-19 pandemic has made it more important than ever to have a solid financial plan since people are having difficulty making ends meet.
Financial advisors who handle wealth no longer only work with the world’s wealthiest people. These professionals now help people of all ages and income levels.
But the sector is facing problems that could hurt its normally high profits and sales. There are new banks, insurers, asset managers, and people who want to get into the market, as well as people who like to spend their own money for little or no cost, stricter government oversight, and the need to make big investments in technology. All of these things put traditional business models at risk.
Environmental, social, and governance (ESG) issues are also becoming more important. This means that wealth management companies need to create purpose-driven workplaces that meet the ethical standards of their customers.
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The business has a lot of room to grow, even with these issues. This is especially true in places like China and India, where wealth is expected to grow in the coming years. The goal is to show the main ways that the wealth management business is changing, as well as some possible winning business plans and the related skills that will be needed to succeed in the years to come.
Four main Signals
There are a lot of new players in the field of wealth management right now. This is taking place because of things like a wider range of customers, new technologies, new rules, uncertain world politics, and the rise of business models that work well. People now expect to be able to do business online easily and with their information through mobile apps, multimedia advice, and robo-advisors. As the customer base grows to include more women, business owners, and eager young people, new market niches are being made.
01 Competition
The fintech revolution has altered wealth management services by bringing in new players who value speed, personalization, and lower prices. Online sites, social networks, and even big online stores like Amazon and Alibaba are getting into wealth management.
Disruptors like robo-advisors, price-comparison tools, ethical spending, and peer-to-peer networking make things easier for people. There are more and more partnerships and alliances between established wealth managers and new fintech companies. Edelweiss Global Wealth Management’s partnership with Salesforce is one example.
02 Economy
The effects of COVID-19 on the economy include a recession, falling consumer trust, rising debt, and slow growth, all of which affect wealth managers who work with the mass market. The market is being affected by the “three Ds”: depopulation, deleveraging, and deglobalization. When the economy changes, wealth managers have to figure out how to handle things like diverse portfolios, contingency plans for investments, and the search for yield in other asset classes.
03 Regulation
To boost competition, improve cybersecurity, safeguard data, and boost trust in the field, regulators are becoming more involved. As open banking grows in popularity, wealth managers need to pay more attention to how they collect, use, and protect customer data. Changing rules on stocks in different areas, like MiFID II in Europe, make it harder to do business across borders. Also, regulators are putting more emphasis on sustainability factors in product control, which shows that ESG issues are getting more attention.
04 Technology
Technology is still a big part of changing how businesses interact with their customers, making them more focused on the customer and more efficient while also cutting costs. Wealth managers should put money into cloud services, data analytics, and automation tools such as apps and robotic process automation (RPA).
AI and machine learning make wealth advice services better by letting advisors offer personalised portfolios and provide proactive customer service. Blockchain and augmented reality are also becoming more popular, but strict security measures must be in place to keep digital activities safe.
Business Models of the Future
The future of wealth management is split into three different business models, each based on the client’s needs and preferences rather than their wealth. This change in the way things have always been done points to a more complex and customer-focused future for the business.
01 The Provider of Financial Well-being
This plan is aimed at people who are price-conscious and provides fairly basic wealth management options. Adopting a very flexible method that combines low costs with valuable benefits is the key to success. It is important to connect customers digitally first in a “low-cost, high-value” way. Operational flexibility and efficiency are very important, especially in the Asia-Pacific (ASPAC) area where tech-savvy customers want high-tech platforms to safely manage their money.
02 The Domestic Wealth Manager
Focusing on sophisticated clients with a high to ultrahigh net worth, domestic wealth managers thrive on building strong relationships through personalized, face-to-face, high-touch contact that is backed up by technology. Some of the most important things for success are having a recognised local or domestic brand, being long-term partners who “steward” people’s or families’ wealth, and providing very personalised services.
This plan works well in both the Americas and Europe, the Middle East, and Africa (EMEA). It provides trustworthy self-service options, timely investment advice, and links to local business owners.
03 The Global Investment Expert
This model is made up of businesses with well-known names and easy access to customers all over the world. They cater to the most sophisticated part of the wealth management market. Some things that make a business successful are global skills, a well-known global brand built on thought leadership, and large-scale operations in financial hubs and wealth destinations that can work across borders.
Only a small number of global financial institutions use this model due to the high costs and difficulty of managing regulatory risks, controls, and cross-border tax compliance. Leading experience in the capital markets is important for success in the Americas. In ASPAC, on the other hand, constant innovation is needed to meet the changing needs of “digital native” investors.
Because of changes in technology and the economy, the wealth management business is going through big changes. It used to only be available to wealthy people, but now new competitors, cheaper choices, and changing rules are making it harder to get into. COVID-19 has made financial planning more important for people of all ages and backgrounds.
In summary, wealth management companies must take purpose-driven actions and account for environmental, social, and governance (ESG) issues in order to deal with these changes. Things aren’t going well, but the business has a lot of room to grow, especially in fast-growing places like China and India. You need to use technology, adapt your business plans to meet the wants of different clients, and stay aware of what’s right and what can last.
