Historically, customers perceived wealth management to be a complex subject that only a few people understood. They lacked the knowledge to decipher the jargon and functions of these products.
As a result, the market remained under-penetrated, with customers preferring gold, real estate, and bank deposits as safe investments. However, much of this dynamic has shifted in the last 5-7 years. Bank deposit rates have fallen; real estate and gold have been difficult to profit from. Customers are increasingly interested in investing in financial assets. This is likely to be a 10-to-20-year transition in which Indians will demonstrate a strong preference for owning financial assets.
A classic Indian wealth client today is far well-versed than a decade ago. Based on the data of domestic inflows and outflows during market ups and downs, it is clear that the average Indian’s risk-taking ability has increased across income categories.
The wealth management industry is thriving. The international wealth management industry is anticipated to grow at a CAGR of 10.7% between 2021 and 2030, from USD 1.25 trillion in 2020 to USD 3.43 trillion by 2030. Race for high-net-worth individuals (HNWIs) is also fiercer than ever. As a result, in order to remain important and capture a larger share of this growing market, businesses must keep up with the newest trends.
Let’s take a look at some of the emerging trends in this industry:
- The growing use of artificial intelligence is one of the industry’s developing trends (AI). AI can be used in a variety of ways to increase productivity, and profitability for wealth management firms, from customer acquisition to portfolio management and compliance.
- The explosion of smartphones and internet access has familiarised investors to the domain of technology. Investors are increasingly gravitating toward platforms with simple user interfaces that allow them to make investments with the swipe of a finger.
- Client-centricity is being ranked in the face of strong competition and margin pressure. This translates into a greater emphasis on customization and responsible goal-based wealth advisory, rather than simply financial product distribution. Wealth managers are rethinking their product strategy for their clients, taking into account cash flows as well as risk-adjusted returns.
- Companies have tried various new tactics to reach a younger demographic over the years. Financial institutes, such as banks and wealth management firms, have been bidding to reach millennials by modifying their offerings to this demographic.
- Another notable trend is the emphasis on asset diversification across financial and physical assets, as well as client recommendations to include foreign assets in their investment portfolio.
- As technology becomes more inescapable in our lives, an increasing number of businesses are proposing digital-only services. Digital firms are becoming more and more common in the wealth management industry. Digital wealth management firms provide their services solely through digital channels such as the internet and mobile applications, eschewing physical offices entirely.
- The rise of robust portfolio evaluation processes is another crucial trend in the wealth management industry. A human financial advisor may be the best choice for a client in some cases, but clients also expect some level of automation. In other words, they want their financial advisor to be able to create an investment strategy using technology and algorithms.
Wealth management is a competitive and difficult industry. Companies must keep up with the latest trends and adapt their services and offerings to meet the changing needs of their clients in order to thrive in this environment. Wealth managers are expected to curate differentiated ideas, stay ahead of the curve by uncovering opportunities, identify evolving trends, and efficiently execute them for investor portfolios in this environment. The above-mentioned points are just a few ways wealth management firms are attempting to expand their presence and stay ahead of the curve.