The New Wealth Management Strategy: How to Serve Evolving Investor Demand

By Valuefy

March 13, 2023


Investor attitudes, behaviours, and expectations dramatically shifted during COVID-19 and transformed the wealth management landscape. But what are the most significant changes for wealth managers to address and how should they respond to ensure the continued success of their business?

Moving Deeper into Digital Wealth Management

Online business has become the norm since COVID-19, and wealth management clients increasingly expect digital engagement. No longer limited to younger investors in the retail market, the digital-first mindset is now commonplace, with older, wealthier investors now increasingly preferring digital engagement for their client onboarding, transaction, and advice needs.

While clients continue to expect a blend of personal and virtual contact with providers, the use of mobile apps, websites and virtual conferencing is overtaking non-digital channels, such as phone calls and in-person meetings. Mobile in particular has come to the fore with investors seeking a convenient, seamless, personalised – and ‘always-on’ – digital experience. 

As digital transformation accelerates, virtual reality may be the next frontier of digital engagement after mobiles. Firms that fully commit to creating a superior digital experience are better positioned to explore future opportunities for client engagement using virtual reality (VR) and augmented reality (AR).

The Search for Alpha

In their hunt for greater returns, investors are seeking alternative investments, such as hedge funds and private equity, and specialised products, including IPOs, tax-exempt investment, commodities, derivatives, and structured products. In addition, family offices are upping their allocations to direct investment management solutions.

While outsized returns are a focus for investors, so are investment risk mitigation and diversification. This will remain a key objective with persistent geopolitical tensions, continued concerns about climate change and supply chain resilience, ongoing inflationary pressure, growing uncertainty about the efficacy and viability of accommodative monetary policy, and a looming global recession.

Doing Well, and Doing Good

Environmental, Social and Governance (ESG) investing remains firmly on the radar for clients and their advisors. This reflects rising social, business, and investor awareness and activism, a trend that was accelerated by COVID-19.

Investors increasingly consider ESG factors alongside traditional financial metrics to better understand the sustainability risks of their investments. Depending on how closely investors want to align their financial objectives with their values, adopting ESG investing can range from mitigating ESG risks by employing exclusionary frameworks to actively investing in the potential opportunities that ESG can offer. Investors expect providers to be knowledgeable about ESG, incorporate it into their products, provide transparency and metrics to track its performance and embed it in their own wealth management strategy and operations as well.

More with Less

In evaluating their wealth management relationships, clients expect providers to prioritise integrity and ethics and to act in their best interests. This trend intensified during COVID-19 which truly crystallised the importance of enduring, valuable personal relationships with advisors. It’s also being accelerated by regulatory shifts that are driving greater competition and investor protection.

While providers are grappling with the growing expectations for quality in wealth management, they are also facing significant challenges due to price compression. A perfect storm of market and regulatory developments continues to squeeze margins. These developments include the market dislocations of the COVID-19 period – that saw heightened trading and competitive pricing from new entrants – as well as increased account aggregation, greater passive investment, the decline of fee minimums, and continued regulatory efforts to implement fiduciary rules.

With sustained pricing pressure and increasingly demanding clients, wealth managers today are tasked with delivering more with less.

The Future Wealth Manager

As wealth managers confront these new realities, they must assess how well they cater to shifting investor attitudes, behaviours, and expectations. Rising global wealth among affluent individuals and families ensures the sector as a whole is well-positioned for growth. But the success of individual firms depends on how well they serve the changing needs of investors. The most successful providers are reshaping their strategy and operations accordingly and leveraging advanced technology as a key enabler of this transformation. 

By implementing advanced technology, firms can deliver the smooth and intuitive digital wealth management experience that clients demand, provide a wide range of increasingly sophisticated products and services, enhance the efficiency and productivity of their operations, strengthen compliance, integrity and ethics across their organisation, and ultimately deliver better investment ideas with higher returns. 

For example, best-in-class providers are investing in enhanced data management to aggregate and standardise data. This is often across multiple data sets related to custodians, brokers, currencies, and products. They are enhancing the monitoring of portfolio insights for complex portfolios, creating holistic views of assets across these portfolios, and implementing advanced attribution and visualisation capabilities. Increasingly, multiple tasks related to investment policy statements, mandates, model portfolios, and portfolio rebalancing are being automated. Advanced technology is also being leveraged to scale and expand, using open APIs for upward and downward integrations. 

Given a volatile, ambiguous, and cost-constrained business environment, technology platforms can be deployed on the cloud to ensure cost-effectiveness and security, with compliance, built-in for multiple jurisdictions.

This technology-backed, data-driven approach drives differentiation, performance, and success in today’s market. It enables firms to quickly and accurately generate analytics for their key client and stakeholder audiences – including investors, consultants, internal teams, and regulators. Crucially, it delivers improved insights for decision-making to professionals across investment, risk, and relationship management functions. This enhances investment and risk outcomes for clients and competitive advantage and business performance for wealth managers.

Rather than just weathering the storm of change in the industry, ambitious wealth managers can harness it to build a better approach for the future. By leveraging advanced technology, they can deliver better digital client experience, greater operational efficiency and productivity, improved investment decision-making, and superior investment performance.

About Valuefy:

Valuefy is a premier investment technology lab with cutting-edge solutions serving leading financial institutions across the globe. Its Wealth Management Solutions has enabled Wealth Managers globally by providing production-grade investment technology for an uberized customer experience.

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