Trends Shaping the Wealth Management Industry - First Quarter 2023
The past year has been witnessed to slow growth and the ongoing battle against inflation causing widespread layoffs, lean payrolls and difficulty in filling skilled positions. 2023 has already seen its first casualty. California lender Silicon Valley Bank collapsed after tech investors and startups set off a bank run. This became the second-largest bank failure in US history, after Washington Mutual in 2008. The threat of a global economic slowdown looms and businesses look for ways to thrive through the downturn. Certainly, the interplay of the factors put together will ultimately shape the story of economic growth for 2023. In wealth management, the implementation of generative AI tools, a rise in interest in embedded wealth and the consumer duty requirements are reshuffling wealth managers’ approaches to business.
Top Trends to Watch in WealthTech during 2023
Global consultancy firm Bain & Company released a new study predicting that customer demand for wealth management services will double over the next eight years, growing to more than $500 billion by 2030. Moreover, with total global financial wealth in 2021 reaching $250tn, 12% of UK adults are using at least one investment app as of July 2021, proving that the industry is only to get stronger. But with inflation roaring again, will the explosion in retail investing built around bull markets take a hit? Let’s delve into what trends are shaping the industry.
Supporting Wealth Planning for the Next Generation
Over the next decade, between 30 and 68 trillion dollars will be transferred by families to their children. In the UK alone, estimates are $15.4 million over the next decade, according to a Russell-Cooke study. Succession planning by wealthy families and family offices is a hot topic in those rarified circles. But for many affluent families, wealth planning has not been priority. According to a report by Russell Investments, only 26% of families have a full strategy on wealth transfer, and once the transfer occurs, 90% of the heirs change advisors. In some countries, such as Switzerland, strict laws prohibiting advisors from contacting the heirs of a deceased client can eliminate communication. Sadly, 70% of families lose control of their assets after the transfer.
Forecast: The Core Ingredient of Engaging Financial Experiences
It has been a few years since digital transformation appeared on the priority list of the financial industry executives. While the evolutionary process of tapping into the latest technology is continuous, the pandemic has accelerated it dramatically. Even the most conservative branches, such as wealth management, now contemplates transforming their businesses into more digitalised operations. Some financial advisors embrace innovation wholeheartedly, reaping all the benefits and facing all the risks of early adoption, while others take a more cautious strategy. OutRank® advocates an incremental, forecast-driven approach when building digital journeys for your customers or financial planners, regardless of where your competitors are in their digital transformation efforts. At Kidbrooke®, we provide Forecast, the module of OutRank®, which delivers predictive forecasting functionality applicable to various financial planning use cases and digital journey elements.