We’re proud to have been part of a wide-ranging research project outlining how wealth and asset management firms will have to adjust to changes in investors’ expectations and priorities following the COVID-19 pandemic.

The Wealth and Asset Management 4.0 group, coordinated by ThoughtLab with support from Recordsure, TCC and a coalition of major financial services firms, has today released the full findings of an extensive research project into the ways the COVID-19 pandemic has affected the financial industry.

The study, Wealth and asset management 4.0: How digital social, and regulatory shifts will transform the industry,  provides a fascinating look at how the pandemic became a watershed moment for the wealth sector.

Here at Recordsure, we were aware that investors’ attitudes and behaviours had already begun evolving to become more socially conscious in response to societal issues such as sustainability and D&I – but our findings have laid bare exactly how much the pandemic has hastened this change in priorities.

Inevitably, these changes mean wealth and asset management providers will need to rethink their strategies, products, services, and pricing models in order to cater to the needs and expectations of modern investors.

In particular, the research outlines a number of crucial shifts that will dictate the course of the industry over the next few years:

The future of wealth management: what you need to know

Because of the pandemic, 40% of investors say digital access has become a greater priority, and nine out of 10 say that mobile will be their preferred channel in the future. In fact, digital is no longer just the domain of millennial customers; it is now preferred by older and richer investors.

Over the next two years, 34% of investors will seek ESG investing advice. Investing for the social good is no longer limited to just millennials: 32% of boomers plan to invest in ESG funds vs. 22% of millennials and 63% of billionaires.   

In two years, 67% of investors will want to invest in alternatives, 49% in IPOs, 47% in tax-exempts, and 45% in commodities. Similarly, 58% of investors will want personal financial planning and 53%, day-to-day financial management services. The difference between wealth levels is fading. For example, 69% of mass affluent want to invest in alternatives vs. 65% of VHNW investors. 

About half of investors say that acting in their best interests is the most effective way for advisors to build relationships with them. When selecting firms, investors use ESG criteria: 48% consider ethical business practices, 41% vision and integrity, 39% approach to inclusion, and 34% social purpose.

Only 37% of investors are happy with provider’s fees, and 36% with fee structures. Even fewer, 35%, understand how their advisors are compensated. Regulators and fintech competition are adding to the pricing pressure.

Over the last year, one-third of investors moved 20% or more of their funds to providers that offered what they want. Over the next two years, 44% plan to do so. And 62% said they are likely or very likely to leave firms to follow their advisors.

Wealth and Asset Management firms now face pressure from investors across generations to provide a robust ESG offering. The desire to see progress on environmental, social and governance issues is not limited to a certain age or wealth of investor, and it’s not surprising that interest in ESG investing and ESG goals spans generations and demographics.

Olivia Fahy, Head of Culture, TCC

What does this mean for wealth and asset managers?

To succeed in this marketplace, wealth and asset management firms need to truly client-centric approach – focusing on the person, not the demographic. That will require reimagining their client segmentation and go-to-market strategies, as well as their range of products, services, and pricing models.

For example:

Offering a greater variety of products

Almost two-thirds of providers plan to offer alternatives over the next two years—a top requirement for investors—and four out of 10 will offer private placements or venture capital opportunities packaged for a wider range of clients. On the services side, more than half of firms plan to offer goals-based planning and, as a result, they will also add more ancillary financial-related services.

Integrating digitalisation into business strategies

Firms will need to shift their digital transformation programs into high gear while finding the ideal calibration between a high-tech and high-touch approach. The research shows that firms that embrace digital transformation on average increase their productivity by 13.8%, AUM by 8.1%, and revenue by 7.7%.

Watching the well-established wealth and asset management industry go through this digital revolution at breathtaking speed is elevating. As a result, investors now have the advantage of a wide range of communications channels to engage with their advisors, simply using the methods they're most at ease with.

Joe Norburn, Group CEO, Recordsure and TCC

These insights are based on a global survey of 2,325 investors across age and wealth levels, as well as a cross-country survey of 500 investment advisory groups, private banks and trust companies, broker-dealers, robo-advisors, family offices, and retail, institutional, and alternative asset management firms.

In addition to Recordsure and TCC Group, the wide-ranging study was sponsored by Deloitte, eToro, FIS, Salesforce, Appway, HCL, LexisNexis Risk Solutions, Publicis Sapient and Refinitiv. 

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