How to connect diverse experiences across wealth

Global demand for more holistic approaches to wealth management is growing. Our research suggests that three complementary elements will be key to developing wealth services that can increase the financial well-being of clients and their families.

The first of these is diversification. All client groups see growing value from a wide spectrum of products and services, with investors expecting to diversify the financial products they use from an average of 4.1 product types today to 5.5 by 2024. Demand for diversification is strong in Asia-Pacific, where clients anticipate using an average of 6.1 financial products within three years.

Most notably, investors expect to make much greater use of alternative investments. Definitions vary among markets, but increasingly include hedge funds, private markets, real estate, infrastructure and commodities, as well as digital assets such as cryptocurrencies. One in three clients invests in alternatives today, but this is projected to reach 48% by 2024. 

The second key element of future wealth services will be more tailored advice. Our research shows increasing demand for planning services, with the proportion of investors using estate and tax planning expected to grow from 30% today to 44% and 45% respectively by 2024. The appetite for personalized financial support is especially strong when the transition between life stages increases clients’ personal responsibilities.

The third leg of next-generation wealth management will be enhanced protection. The COVID-19 pandemic accelerated the wellness agenda, and clients increasingly expect wealth providers to protect their financial, physical and emotional well-being and that of their families. The need to protect clients’ interests extends from hedging against market volatility to maintaining personal health.

The need to deliver richer, tailored and more holistic services in the future will have profound implications for wealth managers’ service models. Many firms will want to enhance their ability to partner with other companies. That includes technology providers and other financial providers, such as alternatives managers or health insurers. Excellent data management, alignment with client goals and building technology connections will be increasingly vital. In some circumstances, it may even mean collaborating with rivals, using “co-opetition” (collaboration with competitors) to provide clients with niche investments, local expertise or customized protection.

Worldwide, nearly half of investors want to consolidate all their financial activities in one place. More than three-quarters of that group — no fewer than 38% of all clients — have yet to choose a single provider. This is a huge opportunity for wealth firms to integrate a full range of financial services, including private banking, insurance, wealth and investments into a single client relationships that can unlock major gains in wallet share.

The appetite for consolidation varies significantly between regions. Clearly, not all investors are seeking a single financial relationship. But even here there’s scope for more firms to act as the primary advisor. Among investors who prefer multiple financial providers, one in four say they would pay more to access a consolidated view of their investment portfolios.

If wealth firms are to build on these opportunities, they will need to convince clients that greater integration will allow them to achieve their goals in an easier, more tailored way. The key enabler will be a firm's ability to smoothly integrate a full range of activities for clients seeking a single financial provider, or to provide a clear consolidated overview for those preferring multiple relationships.

For some providers, the answer will be to enhance their ability to function as a one-stop shop. But most firms are likely to face tougher choices, for example, between curating a universe of products and services on behalf of clients or becoming a specialist provider focused on a niche investor demographic.

Given the varying attitudes to consolidation among different investor groups, the ability to customize the degree of integration will be essential to success. This re-emphasizes the importance of collaboration with other financial providers to “deliver an ecosystem” and points to the importance of engaging flexibly with clients using multiple channels.

Summary

Wealth managers need to ensure they’re ready to meet client expectations of more balanced, tailored and all-encompassing services — not to mention more integrated propositions. Doing so will depend on enhanced partnering, underpinned by a clear understanding of client goals.