1. Holistic advice
The pivot from investments to holistic advice will become a “must have” rather than a “nice to have.” Shrinking margins and near-zero rates, along with increased client engagement and a modest outlook for asset returns, will require wealth managers to serve a greater variety of client needs in order to preserve and grow their businesses.
2. Upping the pricing game
As fee and interest margins remain compressed, pricing will be the go-to option to drive topline growth. Wealth managers will need to look at pricing structure, levels, and discounting authority as major performance management levers. Based on our experience we see a possible uplift of ~5bps on Assets under Management.
3. Delivering CIO expertise
COVID-19 has shown that there is great value in better tactical asset allocation that is more contrarian and stable than simply de-risking at the worst moments. Wealth managers with strong in-house CIO capabilities stand to benefit, while others should look to third-party partnerships to close the gap.
4. Going private as the extended core
Private markets will become the extended core within standard asset allocation over time, with real estate and infrastructure becoming the “new fixed income” and private equity/venture capital and private debt possibly emerging as an extended equity allocation. If wealth managers are unable to provide their clients with wide access, they should look to third-party disruptors such as secondary market liquidity platforms to create participation opportunities for their clients.
5. The race on sustainability
Winning in sustainability will require access to high-quality data beyond carbon and the ability to report on goal fulfilment rather than just financial performance. Wealth managers who want to win in this arena will need to develop an end-to-end proposition that goes beyond the product, deliver customized reporting and have real commitments, e.g. along the lines of “every dollar invested reduced carbon footprint by x”.
6. Linking brand and value proposition to client delivery
This is becoming increasingly important as a key market differentiator to enable advisors to show up for clients every day for every interaction. Wealth managers need to link their brand work much more closely to business strategy and proposition development going forward to stand out from the pack.
7. The platform strikes back (particularly in North America)
After years of looking at their wealth platforms warily, advisors will embrace the power of the home office for macro and market views, planning and workflow management tools, and easy access to high-quality wealth, banking, and insurance products to deliver on the promise of holistic wealth management and differentiate in the marketplace. Wealth managers with a state-of-the-art platform can hope to attract high-quality advisors and stand out from the crowd.
8. Focus on costs - once again
The market rebound has given wealth managers extra time, but they need to act now. The gap between front runners and others is widening. Rethinking physical presence, coverage models, and automated client journeys in onboarding and lending are some of the short-term opportunities leaders are already exploiting.
In a world of COVID-19 travel restrictions, setting up the right legal and compliance framework to more seamlessly bank offshore clients remotely is becoming a business necessity. Wealth managers also need to actively engage policymakers to overcome hurdles; for example, the Wealth Management Connect scheme between China and Hong Kong is challenged by the need of cross-border account opening.
10. Ultimately - the winner takes all
Wealth management is still one of the more fragmented industries in most parts of the globe. Increasing market share will rise to the top of many firms’ management agendas, particularly in developed markets that are more growth constrained. Shareholder pressure for wealth managers to sharpen their pencils will increase.
For more information or advice about any of the trends in wealth management outlined above, contact a member of our dedicated team.