For around the last 200 years, the wealth management industry has operated under the same basic process. Develop a personal relationship with a client, and then create a bespoke financial strategy for them using the best products and services available. It’s a tried and true model, but since the year 2000, the industry has been changing. As the clientele becomes younger, more digital-first solutions are being prioritised as investment tools. As the old money managers gradually retire, younger employees are reshaping the big firms.

While these changes have been brewing for two decades now, the issue suddenly came to a head in 2020. The COVID-19 pandemic has put immense pressure on global wealth markets, requiring them to meet new standards in digital service while offering the same exceptional customisation clients have come to expect. Very suddenly, any firms that were lagging behind were caught unprepared for our new COVID-normal reality.

After almost a year of absolute disruption, a path forward is beginning to emerge. The future of wealth management will retain the personalised service high-net worth individuals have come to expect, with the modern communication and analytics afforded by the latest technology. Customers’ needs are becoming more specific, and only the most reactive, in-touch firms will be able to find success. The 2020 World Finance Wealth Management Awards recognises the firms that are pursuing these new ways of doing business and defining the future of the industry.

 

Crisis averted
The clearest predictions for the future can often come from the past. Boston Consulting Group’s Global Wealth 2020: The Future of Wealth Management—A CEO Agenda took its 20th anniversary to look over the last two decades to help predict where the industry is going.

Notably, the industry is very well adept at managing a crisis, having endured several since the new millennium. Between the dotcom crash and September 11 attacks causing dramatic uncertainty and a slump in global equity, the sector recovered all lost ground by 2003 and was hitting new records in 2005. Once again, the sector experienced a shock in 2008 as the global financial crisis wiped away over $10trn from private wealth in under a year. Following government bailouts and new central bank policies, private wealth had fully recovered by 2010. The last decade has been filled with strife from the lingering European debt crisis and the tumultuous trade relationship between China and the US, but taking a long-term perspective paints a relatively rosy picture. The arrival of the COVID-19 pandemic is expected to put markets through their greatest test yet. Like other troubled periods in the last decade, global wealth is almost certain to contract in the short term, especially given the dramatic increase in newly unemployed people. Depending on the speed of a global recovery, and how effective various health measures are, Boston Consulting Group estimates global wealth levels will recover sometime between 2021 and 2024. In all scenarios the group projected wealth managers can anticipate a hit in the short term, but whether the sector will experience long-term damage is in the hands of health officials.

But no matter how the world progresses after COVID-19, the wealth management sector will undergo a complete personal, as well as financial, transformation. Boston Consulting Group expects wealth management to bring together client needs, interactions and services in new, innovative ways better suited for digital systems. This represents a more tailored and detailed approach in terms of information, alongside the personal service that wealth managers have been traditionally good at.

 

Shifting priorities
How the sector manages the recovery will potentially affect their success for decades to come. Capgemini’s recently released World Wealth Report 2020 paints a clear illustration of the world’s changing wealth as compared to the previous year. In 2019, high net worth individuals’ wealth and population grew by almost 9 percent globally. Geographically, North America and Europe surpassed the Asia-Pacific region for the first time since 2012. However, all of these results predate the COVID-19 pandemic. With trillions of dollars erased from global books, investment priorities have shifted.

Anirban Bose, Capgemini’s Financial Services CEO and Group Executive Board Member, said wealth managers are currently in uncharted waters. “This unpredictable period may also present opportunities for firms to reassess and reinvent their business and operating models to be more agile and resilient. Analytics and automation, as well as emerging technologies like artificial intelligence, can enable firms to enhance revenues through better client experiences while reducing costs by streamlining processes.”

Success will depend on how wealth managers change their products and services in a post-pandemic world. COVID-19 has given people a chance to reflect on what is most important in their lives, and high net worth individuals are no exception. Responding to this, Capgemini reports that high net worth investors expect to allocate 41 percent of their portfolio to sustainable investment products. The interest is not just ethical, with 39 percent of investors expecting to receive high returns from sustainable investment products and 33 percent viewing the category as less speculative. These value-driven decisions are only expected to become more common. Firms are responding to this, with 80 percent now offering sustainable investment options, but their financial results will be highly scrutinised.

 

Technology transformation
Alongside changing preferences, changing expectations subsequently follow. Given that part of the benefit of morally driven investments is seeing a positive change in the world, reporting and statistics are becoming a greater priority. Capgemini illustrates this very clearly in its recent report. Before COVID, more than 60 percent of high net worth individuals surveyed reported a lack of satisfaction when trying to access information about new wealth management offerings or market information. This was particularly true for clients aged between 50 and 59.

Another point of contention is in regards to the role of big tech. Only 26 percent of wealth managers rate big tech as a potential disruptor to their industry, while 74 percent of clients reported a willingness to at least consider a big tech alternative to their current arrangements. This is a startling gap between expectation and reality, illustrating that traditional wealth managers could soon be under threat from a sector they don’t have any insight into.

The challenge will be marrying the new expectations of digital interaction with the personalised services that go hand in hand with wealth management. The advantage of personal wealth management is the human touch that accompanies it. The do-it-yourself nature of digital systems comes close to undermining this distinct quality. The firms that will be successful in the future are the ones that can creatively bring these two concepts together in an innovative and desirable way.

In this increasingly competitive environment, an appetite for bold moves and disruptive practices is required to make headway on new products and services. As people begin to reassess their lives and portfolios for a new COVID-normal world, wealth management should expect a shake-up. The winners of the World Finance Wealth Management Awards 2020 are the businesses that are embracing the future and developing new products that exceed the expectations of both their old and new clients.

 

World Finance Wealth Management Awards 2020

Best Wealth Management Companies

Argentina
Wells Fargo Advisors

Armenia
Unibank Privé

Australia
Escala Partners

Austria
Schoellerbank

Bahamas
Scotia Wealth Management

Belgium
BNP Paribas Fortis

Bermuda
Butterfield Bank

Brazil
BTG Pactual

Canada
Northwood Family Office

Chile
BTG Pactual

China
China Merchants Bank

Denmark
Nordea

Finland
Taaleri Wealth Management

France
BNP Paribas Banque Privée

Germany
UBS

Ghana
The Royal Bank

Greece
Hellenic Asset Management

Hong Kong
BNP Paribas Wealth Management

Hungary
Hold Asset management

India
IIFL Private Wealth Management

Indonesia
Bank of Singapore

Italy
BNL BNP Paribas

Kuwait
NBK Capital

Lithuania
INVL

Luxembourg
BGL BNP Paribas

Malaysia
RHB

Mauritius
Bank One

Netherlands
ABN AMRO MeesPierson

Nigeria
FBN Quest Merchant Bank

Norway
Nordea

Oman
Bank Muscat

Philippines
Bank of the Philippine Islands

Poland
CITI Handlowy

Portugal
Santander Totta

Qatar
Qatar National Bank

Saudi Arabia
SABB

Singapore
Bank of Singapore

South Africa
Old Mutual

Spain
Santander

Sweden
Carnegie

Switzerland
BNP Paribas Wealth Management

Taiwan
Cathay United Bank

Thailand
Kiatnakin Phatra Securities

UAE
First Abu Dhabi Bank

US
Merrill Lynch Wealth Management

Vietnam
Prestige Wealth Management

 

Best Multi-Client Family Office, Liechtenstein
Kaiser Partner

Best Real Estate Investment Company
SFO Group

Most Innovative Wealth Manager, Europe
XSpot Wealth