Wealth management has great potential for growth prospects, fewer capital needs, and high ROE (return on equity) compared to some other retail banking enterprises.
Fremont, CA: The wealth management (WM) industry is seeing major transformation with the rise of a new generation of investors with preferences and expectations molded by the latest technologies and living through the last financial crisis.
WM has great potential for growth prospects, fewer capital needs, and high ROE (return on equity) as opposed to some other retail banking enterprises. Its offerings are also important to attract and retain profitable retail customers.
Comprehensive Goals-based Advice
Investment advice has become commoditized, and many WM companies and smaller RIAs can generally access the same products, tools, and models. It has also become difficult for most financial advisors to show that their services are distinguished based on their investing skills.
WM organizations and their advisors need to change to an integrated, goal-based advice and access performance according to the achieving clients’ goals under an agreed timeframe instead of achieving market benchmarks. Additionally, this widens the scope of advice advisors offer, from investment to wealth management and evade the commoditization of investment advice.
Convergence and New Competitive Patterns
There has been a growth in competition in the WM sector, motivated by the new commitment by current WM companies, new investments by retail banks, and the rise of new firms and business models as they compete for the same clients and assets. Few key trends are:
• There will be continued overlapping of brokerage and private banking models to provide successful clients with a wide range of advisory, investment, banking, and lending ability.
• Big, diversified banks will focus on cross-selling of wealth and banking series to their client base and further align with their different WM business models and brands as unique channels instead of businesses.
• Robo advice abilities will potentially allow the distribution arms of insurance companies and asset managers to offer advice to the same clients and compete with other WM companies.
Analytics and Big Data
The rise of innovative technologies has helped analyze and process the enormous amount of consumer data and make sense of it. Big Data has transformed so many industries, and with WM companies investing in developing advanced analytics and data management capabilities, this industry will also go through positive changes.
More companies will develop descriptive and predictive analytics that merge internal and external, structured, and unstructured data to develop a comprehensive and insightful client profile. They can evaluate existing and possibly new clients’ tendency to buy different products and services, investment styles, risk tolerance, and lifetime value.