Emerging Market Offerings Will Dominate Wealth Management Industry Growth

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The survey, which interviewed around 100 representatives of leading private wealth management firms, found that despite near-term challenges from inflation and the uncertain outcome of the Russian-Ukrainian war, global wealth is expected to record constant growth.

The Pacific ex-Japan is expected to see the fastest growth in private wealth, with increased penetration of private wealth managers and riskier financial products gaining popularity.

Respondents said market consolidation through mergers and acquisitions provides the opportunity to diversify their offerings into new markets or add new technology-driven services to their product portfolios. While North America is leading the trend, Europe and Asia are also embracing it either through outright M&As or partnerships.

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According to Acuity, the growing number of young and female private wealth clients with higher risk appetites has underscored the need for private wealth managers to combine technology with expert advice.

“Younger clients with a higher risk appetite prefer a mix of high-quality tools/dashboards to monitor their routine investments and specialist advice on niches such as alternative investments,” says The report.

Respondents also pointed to an increase in demand for wealth preservation strategies for future generations post-pandemic, as well as ESG-focused investment advice.

“To keep up with the changing private wealth landscape, wealth managers need to rethink their client offerings,” said Chanakya Dissanayake, Managing Director, Global Head of Investment Research at Acuity Knowledge Partners.

“Our annual survey notes that companies expect increased demand for premium services, expansion into emerging markets and personalization of offerings combined with technology. key cost drivers, improving investment manager productivity and leveraging outsourcing are cost-effective ways to drive profit growth and gain competitive advantage.”

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Dissanayake added that the survey results show the different challenges faced by wealth managers, from pressure on margins and ensuring regulatory compliance to operational challenges.

“Wealth management companies need to be flexible and embrace technological innovation and changing demand to maintain and grow their customer base,” he said.

When it comes to potential threats in maintaining client markets, the emergence of new platforms targeting young, affluent clients was seen as the biggest threat with 32% of responses.

This is followed by next-generation clients, categorized as 25-50 year olds, who self-manage their routine investments and use high-end advisory services only for specialized and complex investment products.

Other concerns include the lack of diversity of offerings (26%), the rising cost of consulting services (24%) and the inability to provide customers with ongoing value-added service (23%).

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