The winds of change are constantly moving through the global wealth industry. We can see them blowing fiercest in the Trading & Asset Management sector. The recent market turns have been particularly tumultuous thanks to recent external forces on the industry. Since the sub-prime meltdown and Great Recession of 2008, industry leaders have needed to navigate their firms through a Eurozone debt crisis, an emerging market slowdown, and a collapse in oil prices.
With monetary policy losing its efficacy, we can classify low interest rates and mediocre growth as the new normals. This is only compounded by growing nationalistic sentiments that are felt globally with the potential to pivot the foundation of global markets into uncharted territory. Brexit is a good example of this, highlighting the dramatic effects these new political trends can have on the global market and the effects of its collateral damage. While some hope Brexit was an isolated event that doesn’t signal others in the EU to follow suit, we can not ignore the higher risk of EU and Eurozone disintegration and other potential global disruptions.
However, like with most industries, the true champions of change will not be the external forces, but the internal drivers. We are seeing fast shifts being led not by regulations or low-interest rates but by the customer’s desire for a high-quality digital experience. This is a pivotal moment for the investment advisory business. As Broad Ridge points out in their Wealth and Asset Management Report 2021, a convergence of technological, economic, demographic and consumer trends will be the main force shifting trends indefinitely in 2021. Customer expectations are being reshaped causing business models to adapt and redefine the flow of the advisor. Wide-ranging Digital transformation will be the result and this does mean that a wave of extinction is most likely to follow for those companies that can’t adapt.
There is no doubt that technology is the preferred vehicle for change with customers and the industry alike, but where does this leave the future trajectory of wealth? By 2021 we will see radical market change and new opportunities come from not only the technological advances but also the demographic shifts and wealth creation in the emerging markets. A rise in household assets is guaranteed in the top world markets expecting to pump north of €40 trillion into the wealth industry.
Despite the challenges ahead we can see in today’s market shifts are already helping businesses to attract, retain, and satisfy customers. It would not be unfair to project and even hope continued upside on business growth, improved margins, advisor efficiency, and better business models. Some of this confidence is justified: Technology is already pushing the democratization of the financial services, creating new markets, and making providers more efficient. Moreover, incumbents in the investment services sector are well-positioned for future success, thanks to their loyal customer bases, established brands, and proven track records.