Investment in Digitalisation will Drive Costs for Wealth Managers Adapting to Post-Pandemic Client Demands

Growing number of younger clients and female investors highlights need for tailored advisory and cutting-edge technology.

Acuity Knowledge Partners (Acuity), a leading provider of bespoke research, analytics, staffing and technology solutions to the financial services sector, today released findings from its annual global Wealth Managers survey. The study explores the latest trends in wealth management and how key players are reorganising their offerings to suit market requirements.

Wealth managers are set to grow their share of assets under management (AUM), with 41% of respondents agreeing that the increase is likely to be dominated by entry into growing emerging markets, followed by acquisitions of smaller players and recruitment of investment managers.

Wealth managers are expected to benefit from key macro trends such as growing wealth pools across the world, especially in Asia. However, respondents indicate that the uncertainty following the global pandemic and the ongoing Russia-Ukraine war has highlighted the need for wealth-preservation strategies and 24*7 support.

“To cope with the changing private wealth landscape, wealth managers must rethink their client offerings”, said Chanakya Dissanayake, Managing Director, Global Head of Investment Research at Acuity Knowledge Partners. “Our annual survey notes that firms expect an increase in demand for premium services, expansion to emerging markets and personalisation of offerings combined with technology. While these are key cost drivers, improving investment manager productivity and leveraging outsourcing are cost-effective means to drive profitable growth and gain a competitive edge.”

“Our findings show the various challenges wealth managers face, from margin pressure and ensuring regulatory compliance to operational challenges. Wealth management firms should be flexible and embrace technological innovation and changes in demands to sustain and grow their client base”, added Chanakya Dissanayake.

Key Findings from Private Wealth Management firms:

Global private wealth is set to grow in the coming years despite the headwinds from geopolitical issues and rising inflation. Growth in AuM is likely to be dominated by entry into emerging markets, market consolidation and recruitment of more investment managers.

The private wealth management sector is facing a shift in the client mix and the growing number of younger clients, with higher risk appetite, has emphasised the need for private wealth managers to combine technology and specialised advisory. Additionally, following the pandemic, respondents highlight an increase in demand for wealth-preservation strategies for future generations, as well as ESG-focused investment advice.

About 65% of respondents expect that investment in digitalisation will account for most of the costs in the coming three years. Expansion into emerging markets and increasing advisor headcount are also forecasted to rise costs. However, a global and flexible operating model that leverages the outsourcing of specialist talent in cost-effective locations can reduce spending by 50-80%.

Please find the survey report here.

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