Top 5 emerging trends in wealth management

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Wealth management is a booming industry. The global wealth management industry pegged at USD 1.25 trillion in 2020 is expected to touch USD 3.43 trillion by 2030, growing at a CAGR of 10.7% between 2021 and 2030. While the scope and potential of this industry are quite staggering, there is also an increasing level of fragmentation in terms of services offered and client segments targeted by various wealth management companies.

The competition for high net worth individuals (HNWIs) has also grown fiercer than ever before. As a result, businesses need to keep up with the latest trends to remain relevant and capture a larger pie of this evolving market. Let’s look at some of the emerging trends witnessed by this industry.

AI-based Wealth Management

One of the evolving trends in the industry is the growing use of artificial intelligence (AI). Financial services industry is one of the first to adopt AI-based technologies significantly, and wealth management is no exception. From customer acquisition to portfolio management and compliance, AI can be used in a variety of ways that can increase efficiency, productivity, and profitability for wealth management companies.

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For example, AI is being increasingly used to automate tedious tasks such as compliance checks and credit rating analysis, as well as more strategic tasks such as complex investment analysis and portfolio optimization.

This can lower the costs associated with hiring large numbers of employees while also improving customer experience significantly. If a customer calls the customer service representatives of your wealth management company, they will be given personalized solutions and recommendations based on their financial situation.

Robo-advisor Wealth Management

Another trend that has gained a lot of traction in the last couple of years is the rise of robo-advisor wealth management services. Simply put, a robo-advisor is a type of digital wealth management service that offers automated portfolio management. Typically, customers log into their account and answer a few questions related to their financial situation, investment objectives, and risk tolerance.

They can also upload their previous financial data, such as investment statements, tax returns, and other financial documents. Once the account is set up, the customer can log into their account at any time to see their portfolio and make adjustments if needed. Robo-advisors are a great option if wealth management firms don’t have a lot of money to invest.

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These services are also a good fit for investors who want to grow their money but are confused and don’t have the expertise to create a solid investment strategy. A robo-advisor is an excellent choice for investors willing to build a passive income stream through a diversified portfolio of ETFs (Exchange Traded Funds).

However, note that these services are not a one-size-fits-all solution. Customers can choose from several robo-advisor services, each offering different investment strategies.

Millennial-focused Wealth Management

Over the years, companies have tried reaching a younger demographic through various new approaches. Financial institutions such as banks and wealth management companies have been trying to reach millennials by adapting their offerings to this particular segment.
Although millennials are expected to become the largest HNWI segment in the world, most don’t have any investment or retirement plans at all. It’s vital to note that not all millennials are the same. While some are eager to get started with investing, others are less inclined to take this path.

For this reason, it’s important to understand the characteristics of a millennial client and design your services accordingly. If you want to target and reach millennials, you’ll have to be flexible and adaptable. You’ll have to offer products that are easy to understand, flexible, and convenient to succeed.

Digital-first Wealth Management

Thanks to deep penetration of technology in our lives, we’re seeing an increasing number of companies provide digital-only services. In the wealth management industry, digital-first companies are becoming more and more common. Digital-first wealth management companies offer their services exclusively via digital channels such as the internet and mobile applications, foregoing brick-and-mortar offices altogether.

This model has a number of advantages and can be a great fit for millennial clients. With this approach, you can enjoy several benefits, such as cost savings, scalability, and convenience. Of course, it’s also important to note that digital-first doesn’t mean cutting corners or providing less value. On the contrary, a digital-first company must provide an exceptional experience.

Customers must be able to access their account, make changes to their investment strategy, or ask questions to the customer service team at any time, without having to visit a physical office. The best digital-first wealth management companies are able to successfully merge digital and human elements, delivering a great customer experience to their clients.

Robust Portfolio Review Process

Another key trend in the wealth management industry is the rise of robust portfolio review processes. In some cases, a human financial advisor might be the best choice for a client, but clients also expect a certain level of automation. In other words, they want their financial advisor to be able to use technology and algorithms to create an investment strategy.

This saves time in portfolio analysis and allows more time on strategic advice, and it will also allow advisors to handle larger client portfolios. Portfolio review processes have to be robust enough to provide the necessary level of precision and accuracy for investment decisions. They also need to flexible to accommodate for various types of client scenarios, risk profiles, and investment objectives.

The Bottom line

As evident, wealth management is a competitive, challenging industry. In order to thrive in this environment, companies must keep up with the latest trends, as well as adapt their services and offerings to suit the changing needs of their clients. Artificial intelligence, robo-advisors, and digital-first services are just a few examples of how wealth management companies are trying to expand their presence and staying ahead of the curve.

However, it’s important to note that these trends are not mutually exclusive. Many companies are investing in these new technologies and trends and are successfully implementing them in their operations.

(By Rahul Jain, President & Head, Personal Wealth, Edelweiss Wealth Management)