Wealth management — Overview, the adviser’s role, disruptions and industry response — Part I

Published on December 1, 2022 by Shreyash Wani

If you don’t know how to care for money, money will stay away from you” — Robert T Kiyosaki

When it comes to finance, everybody has one goal — getting rich. But this is an arduous journey, requiring patience, perseverance, discipline and clever investments. You may need financial advisers to help you formulate techniques to achieve financial goals. While you may be able to save a significant amount of cash through traditional methods, it takes talent to create wealth from investment. This is where wealth management experts can help by creating a tailored investment strategy through which your financial savings can be compounded, and assets can be managed.

The global financial crisis of 2009 made individuals and corporates realise the need for deeper understanding for managing their wealth. This amplified the role of the wealth manager considerably, calling for a more integrated approach to address current and future client needs. Integrated wealth advice is paramount for helping clients make prudent investment choices and providing responsible and holistic solutions unique to each individual. The chart below provides an overview of the different service areas wealth managers should consider when serving clients.

Wealth management service areas

Continued rise in wealth

Global wealth nearly tripled to USD226.4tn in 2019 from USD80.5tn in 1999, according to Boston Consulting Group (BCG), despite material headwinds decelerating global economic growth. These headwinds included (1) the dot-com bust in the early 2000s, (2) the sub-prime crisis, which led to a global recession in 2008–09 and around 2018 and (3i) the US-China trade face-off, creating trade imbalances.

Personal finances will likely ramp up from 2019 (USD226.4tn) through 2024, according to BCG’s projections (based on divergent economic growth scenarios,. The chart below summarises the projections.

The takeaway from the projections is that wealth managers will likely serve a large client pool over the coming years.

PwC projects global assets under management (AuM) to escalate in the coming years, signalling a burgeoning client base. It estimates global AuM to reach USD147tn by 2025.

Global AuM (USDtn)

Appeal of advisers will likely continue

Savings will likely gain in currency, especially after the financial crunch amid the pandemic, with many, including the younger generation, and corporates attaching significant weightage to financial planning and advice.

Advice is typically sought on retirement planning, portfolio construction, legacy planning and tax planning. However, the landscape is changing, with some scenarios calling for constant financial advice:

  • Integrated approach — Client demand for consultation is changing — from advice for handling a specific situation to comprehensive advice. Individuals may rely on one firm for retirement plans, but seek another to manage housing or property-related matters. A talent pool could provide solutions under one roof.
  • Several “firsts” — The younger generation needs to navigate through several “firsts” in their life such as parenthood and home purchase. For childcare, they may seek advice on day care centres, employing nannies or reducing one parent’s work hours. Advisers could play a crucial role in this context.
  • Knowledge-sharing — The new generation of investors has a substantia amount of information available to them and increased awareness of financial matters. They, therefore, wish to take charge of their financial matters, but expect advisers is broaden their perspectives by sharing advice and helping them make decisions.
  • Diminishing gender gap — By the end of the next decade, women should account for over USD30tn of global financial assets, according to McKinsey. The consultant also believes female financial decision-makers will likely outnumber their male counterparts in hiring an adviser and pay a premium for customised financial advisory services.

Overall, clients are looking for financial advisers who can empathise with a situation before making a decision on their behalf. Providing individualised attention and insights for addressing their most complex needs will be a priority.

The wealth management sector is seeing disruptions from robo-advisory, ageing advisers, technology upgrades and, of course, an uncertain economic environment.

We will explore these disruptions and the sector’s response in part 2 of this series.

How Acuity Knowledge Partners can help

Acuity is a leading provider of high-value research, analytics and business intelligence to financial services sector, with support 400 financial institutions and consulting companies through our specialist workforce of more than 5,000 analysts and delivery experts across our global delivery network

Our USP is a managed-services model that deploys a combination of process, people and technology to ensure a seamless fund marketing process. For asset managers, this means minimal time spent on this process and hassle-free updates. Our clients have saved 30–50% of costs by adopting this solution. We design bespoke solutions to meet client requirements.

About the Author

Shreyash Wani has over 12 years of experience in investment research, content development, and market risk management. Working as a Delivery Manager with the Fund Marketing service team at Acuity, he is responsible for developing fund commentaries, formulating Institutional investment reports, framing public responses for the research analysts, diagnosing financial statements for funds’ holdings, authoring sales pitches for clients to attract additional AUM and monitoring multi-asset analytical reports. Previously, he was associated with an IT company working as a Business Analyst in enhancing the capabilities of the Market Risk management tool used by large commercial banks. Shreyash holds a CFA charter and FRM charter and has completed B.Com from Sydenham College of Commerce & Economics, University of Mumbai.

Originally published at https://www.acuitykp.com.

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We write about financial industry trends, the impact of regulatory changes and opinions on industry inflection points. https://www.acuitykp.com/