The COVID-19 pandemic has changed how people interact, businesses function and process, and employees navigate the job market. It also enabled the rise of automation, accessibility, and connectivity. All this modernization would not be possible without technological advancements.
Digital transformation has significantly impacted many industries and aspects of modern life. Among many other things, digitization also influenced wealth management. People have different takes on wealth management, which vary due to a person’s age, needs, and priorities. However, key wealth management trends such as those below are worth learning about in the digital transformation age.
1. Investors under 40
The number of young investors increases as time goes by. However, many of them are dissatisfied with several matters. About 50% of high-net-worth investors below 40 are unhappy with their advisory firm's personalized offerings and digital interfaces.
Additionally, 39% are likely to ask for an Environmental, Social, and Corporate Governance (ESG) score for investment products. These findings show that young investors are careful where they put their money.
2. All investors
As for the general population of investors, 50% found products and investment options complicated, while 51% were displeased with their wealth manager or client communication channel choices.
3. More consolidation
Another wealth management trend during the digital age is the increase in mergers. The number of mergers of advisory firms grew from 203 in 2019 to 205 in 2020. Experts believe this upsurge will continue as big companies such as Alphabet, Amazon, Apple, and Meta are expected to enter the market.
4. Family offices
There are about 10,000 family offices globally, controlling around $6 trillion-$7 trillion in assets. These family offices have a big market, including an estimated 201,000 high-net-worth investors.
5. Cryptocurrency
In 2021, there were more than 8,000 cryptocurrencies worth $1.6 trillion. Out of over 2,900 high-net-worth individuals, 72% have invested in cryptocurrencies, and 91% are under 40.
6. Cybercrime
Digital transformations are not exempt from threats. Cybercrime damages caused advisory firms about $6 trillion in 2021, double the cost compared to 2015.
7. Hybrid advice
Most high-earning individuals worldwide would rather autonomously transact and access information than rely on human assistance. However, 60% research and get investment advice from their wealth management firm. Only 17% leave their decisions to their advisory firm.
8. ESG investing
An ESG score is in demand in wealth management, as 43% of ultra-high-net-worth persons, including 39% of under-age 40 investors, request this from advisory firms.
9. Use of behavioral analytics
Behavioral finance techniques are one of the wealth management trends today, with 81% of advisors using them during client interactions. This figure increased from 71% in 2019.
10. Onboarding issues
Although digitization is taking over wealth management, banks still need a convenient onboarding process for their clients. Luckily, 95% of wealth managers are striving for better automation.
11. Direct indexing
Investors can benefit more from direct indexing in the next five years than ETFs, mutual funds, and separately managed accounts.
12. Artificial intelligence
In today’s digital age, AI plays a significant role in financial advice, including how it is created, delivered to, and consumed by clients. Eighty-seven percent of individuals want to use and learn AI tools if it will benefit them.
13. Advisor succession planning
With 40% of advisors expected to retire in the next 10 years, many are concerned about employee retention and who will take over.
The age of digital transformation is full of adjustments and changes, causing shifts in trends. Despite these changes, it is still important to stay updated to maximize resources and secure wealth.
