While The Wealth Mosaic currently tends to look at the wealth management sector through the prism of technology, a reflection of the current focus on well over 2,000 WealthTech firms within global vendor directory, it is clear that the industry is being reshaped and driven by a broader set of changes. That said, the depth of our WealthTech vendor directory also acts as a powerful barometer of the topics at play around the sector – technology runs increasingly deep across the needs of the sector.
Looking at our directory and the diversity of content, insights and thinking around the global wealth management sector, putting our analyst hat back on for a moment, we see eight areas of fundamental focus and change, the industry’s tectonic plates, constantly in motion with their movement dictating the very shape and nature of the sector for the years ahead.
The eight (in no particular order):
- Clients – The lifeblood of any industry, wealth management clients are growing in number but also type and their expectations are changing due to a broad range of influences. Younger, more diverse, different expectations, new ways of creating, accessing and managing wealth, the industry needs to keep up. Does the industry fully understand it’s consumer, who they are, what they want, how to reach, engage, service and retain them? This is a moving target, but the size of the opportunity makes it one worth pursuing.
- Advisers – The average age of advisers in both the UK and US is around 56. While the number of younger advisers is relatively small and fears remain about the numbers entering the industry. Safe to say, due to numerous factors, the job is harder than it once was. And with clients changing too, advisers need to change – age, origin, skills, knowledge, qualifications, ongoing training, use of technology, etc. The job is no jolly, but it can still be highly rewarding for the right people if the industry can attract them.
- Skills – Closely related, but now looking across all aspects of the business – front to back, corporate office, technology, product, compliance, etc. The changes that have taken place around the sector mean the skills needed across all aspects of the business continue to evolve. Technology, in development, management and use, is a huge skills topic. The diversity of clients is another factor, with soft skills and affinity with different segments now higher on the agenda, the depth, range and complexity of products is another with areas like alternatives and impact now at play. The list goes on.
- Business – There are significant changes afoot within the general ‘business’ of wealth too. The competitive landscape – new players, partnerships, market entrants, distribution channels, etc. Mergers and acquisition – the fragmented nature of the industry, private equity players engaged and active, consolidators hoovering up businesses. Bringing wider services to bear through partnerships. Leadership too – who are the industry’s leaders, what are their skills? The arrival of leaner, agile operating models, open to constant change and modification. There is much to review.
- Financial – The financial model of the industry is under pressure too. With so much going on, costs are up and driving efficiency through the business is a major goal. Cost-income ratios are under pressure. The comfortable life of a wealth manager, less capital intense, is a thing of the past. Talent, technology and compliance, only three elements of the equation, are expensive. Pricing models are under review. Is the AUM-based pricing model justified, should firms look at subscription, performance-based pricing or other models? What will future clients pay for the proposition? How does the industry justify its fees?
- Technology and data – Ah, technology (and data)! Never has there been so much technology available to the industry, whether built for wealth specifically for the sector or more general but available to it. Increasingly capable but complex to keep up and integrate, the market is now evolving faster than ever with the addition of the Artificial Intelligence layer/toolkit. The technology-enabled wealth manager is now a thing, the digital-first business is in play, the role of technology across almost every aspect of the business of wealth is a thing, opening up new possibilities. How the industry embraces and changes through its use of the many new technologies available to it will be fascinating to watch.
- Products and services – The array of products now available (or expected) through wealth managers has exploded. Even just on the investment product side, the push for various alternative investment products alongside traditional products is creating further complexity. Then there are overlays such as ESG and impact. Further, to meet the full financial and lifestyle needs of its clients, some firms are pushing more into family office and other related service lines. Where does the industry draw the line? What is a wealth management product and service? To attract and retain clients, the product and service needs to evolve but its growth adds further complication for operations, technology, marketing, people and more.
- Regulation – last but not least, everyone’s true favourite(!), of course, the ongoing ‘tsunami’ of regulation. From a sector that was seen to be relatively lightly regulated looking back ten to 20 years, the sector is now increasingly part of the regulatory focus across the world. From RDR and Consumer Duty in the UK to the Royal Commission in Australia to many other examples, the regulatory focus and ‘burden’ on the wealth management sector weighs heavier than ever and is a prime reason for M&A activity in various markets. New tools, channels and tech like AI open up new compliance questions which, for the smaller firms in particular, pose a significant hurdle to doing business.
That’s my quick summary of what we are observing across the sector and where we see the major areas of change. While frustration might sometimes come out at the pace of change in the sector, with the above and in every report, video, event, webinar or article that touches on the many and varied focus and needs of the industry, it is clear that there is much to do and a range of topics that are slowing down the sector’s ability to move. Move fast and break things is possible in some small areas, but that mindset needs to be tempered with the industry’s heavy responsibility to its clients. Wealth management is faced with a deep set of opportunities and challenges, the majority of which can be reached or overcome but only through consistent effort, planning and execution.
We remain fascinated by how the industry is changing, who is leading the charge, and what that means for the future size, shape and culture of wealth management across the globe.
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The Wealth Mosaic is a UK-headquartered online solution provider directory and knowledge resource, focused specifically on the wealth management industry.
For wealth managers, the buy side of our marketplace, The Wealth Mosaic is designed to enable discovery of key solutions, solution providers and knowledge resources by specific business needs.
For solution providers and vendors, the sell side of our marketplace, The Wealth Mosaic exists to support the positioning, exposure and business development needs of these firms in a more complex and demanding market.
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