Page 32 - Investment Advisor June 2023

Cover Story

If wealth management firms are to succeed, the report says, Wealth management firms are refocusing on the mass
they must prioritize growth strategies, adopt innovative busi- affluent segment. Wealth management firms have histori-
ness models and mindsets, and be able to respond to dynamic cally catered to high-net-worth individuals with personalized,
market conditions by altering resources quickly. fee-based approaches and retail clients with a broad product
Capgemini based its latest trends report on analysis of range, but they overlooked investors with assets between
themes such as public calls for more stringent regulations to $250,000 and $1 million. The mass affluent segment is flour-
curb corporate greenwashing; the outsourcing of the invest- ishing as more middle-class individuals seek to expand their
ment function; demand for digital assets; requests for direct wealth through investment.
indexing investment strategies; strategies to expand market As women increasingly control more wealth, firms look to
share through new investor segments; cybersecurity; M&A: earn their trust. Women own a third of today’s global wealth,
and the influence of family offices. yet many wealth management firms misjudge their require-
The top trends in wealth management in 2023, Capgemini ments, leaving women underserved. Firms will need to tap into
says, are: the unique needs and preferences of this demographic and its
esG and corporate investment greenwashing face increased diverse sub-segments, including professionals, entrepreneurs,
scrutiny. As high-net-worth investors increasingly demand widows, retirees and more.
ESG-aligned products, wealth management firms must pre- Future-ready cybersecurity becomes a business imperative.
pare to meet investors’ changing priorities by differentiating A robust cybersecurity system is critical in 2023 as wealth
their advice. Regulatory scru- management firms acceler-
tiny will be essential as inves- Large and small wealth ate the deployment of new
tors seek assurance against management firms are reevaluating and advanced applications,
greenwashing. Expect stan- adopting emerging technolo-
dardization and transparency their long-term strategic direction gies such as cloud comput-
as regulators drive to safe- and strongly considering ing, artificial intelligence and
guard investors. big data analytics through
the demand for outsourced consolidation to penetrate the high- digital platforms.
chief investment officer ser- net-worth market more deeply. A digitalized core helps
vices is on the rise. As assets bridge the gap between
become increasingly com- —Capgemini expectations and capabili-
plex and market uncertainty ties. Relationship managers
makes expert adjustments essential, specialist managers are are multitaskers, offering financial guidance, conduct-
now critical components within the wealth management ing client meetings, acquiring and retaining clients and
ecosystem. Outsourced chief investment officer (or OCIO) performing administrative tasks — all while keeping up
services — the full or partial outsourcing of an organization’s with professional development. Not surprisingly, they can
investment function to a third party or investment consul- dedicate little time to strategic initiatives. Wealth advi-
tant — offer cost-effective support. sors will gain an efficiency edge as firms modernize their
the investor appetite for digital assets goes beyond core infrastructure and invest in personalization and data
cryptocurrencies. Investor demand for portfolio expan- analysis tools.
sion and diversification is encouraging wealth management the wealth management industry is consolidating to
firms to offer digitally structured products in addition to achieve scale. Large and small wealth management firms
digital tokens or “coins” which exist on a distributed and are reevaluating their long-term strategic direction and
on the decentralized ledger (blockchain). Wealth manage- strongly considering consolidation to penetrate the high-
ment firms will be able to talk to clients about the range of net-worth market more deeply. Through mergers and acqui-
products available, but also strategic investing, regulations sitions, firms can cater to new markets and client segments
and risk. with a broad range of products and services to suit wealthy
volatility is driving investor interest in direct indexing and investors’ appetites.
other new portfolio strategies. Global financial markets are Family offices showcase bespoke services while facing regu-
uncertain because of lackluster corporate earnings, rising latory dynamics. Family offices are becoming popular within
interest rates, inflation and incendiary geopolitics. A rebal- some high-net-worth circles. These offices have historically
anced portfolio that distributes risk across geographies, indus- demonstrated long-term vision for multigenerational wealth
tries and asset classes can be a safety hedge within a dynamic through all-in-one-place convenience and highly personalized
investment environment. As interest in direct indexing grows, services. The list of services provided by this “central hub” will
expect asset management firms to invest in supporting tech- only grow, encompassing legal advice, health care, tax plan-
nology and advisory tools. ning and more.

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