Adapting to shifting investor expectations: How Asset & Wealth Management Organisations can survive the shift.

PwC’s latest Global Asset and Wealth Management report has predicted that by 2027, 16% of existing asset and wealth management (AWM) organisations will have been swallowed up or have fallen by the wayside, double the historical rate of turnover. The overall message of the report is clear: AWM organisations must adapt or fail. In particular, they must learn to adapt to rapidly shifting investor expectations. As an unprecedented wealth transfer from baby boomers to millennials begins, AWM organisations will need to work harder than ever to understand how this new type of investor operates, what products they want and how to best meet their needs and expectations.???

Investors are increasingly more happy to ‘shop around.’ The stats show that millennials are more than twice as likely than the baby boomer generation to switch between wealth managers. Now more than ever, AWMs must be in touch with what their customers want. In this article, we will explore some of the key areas where investor expectations are shifting and how AWMs can respond accordingly.?

Environmental, Social, and Governance (ESG)

Interest in environmental, social, and governance (ESG) investing has been rapidly growing. This growth in popularity is being heavily driven by the new wave of millennial investors who are prioritising investments that align with their own personal values. An incredible 63% of millennials believe it’s important to combat societal issues through their choice of investments and approximately 89% of investors considered ESG issues in some form as part of their investment approach in 2022. These numbers clearly demonstrate that embracing investment products that align with ESG principles is non-negotiable for AWMs. Organisations should be ready and willing to answer difficult questions when it comes to the ethics and social impact of the investments they are choosing.?

Demand for Digital?

Today’s investor is more tech-savvy than ever.? As a result of the pandemic, 40% of investors say digital access has become a greater priority, and 9 out of 10 say that mobile will be their preferred channel for investing in the future. Over a third of millennials see a strong digital offering as important when selecting a wealth management provider, with this ranking far above other considerations such as fees. AWMs must embrace the rapidly evolving technology available to them or risk being left behind.?

This digital revolution also includes far more demand for cryptocurrency investment products. This is in part driven by millennial investors' bigger risk appetite than the generation before them. In fact, cryptocurrency is now the most held asset amongst millennials and Gen Z investors. Firms able to meet this demand are far more likely to stand the test of time than those that show hesitation.?

Private Market Access & Democratisation?

The high level of uncertainty in today’s economic climate is making it far more challenging for fund managers to outperform the market and make their clients happy. For perhaps the first time in their career, fund managers are even competing with savings accounts as more and more investors are attracted by the safe haven of cash and some of the highest interest rates seen in decades. This low-yield environment has meant that investors are demanding access to investment products previously reserved for the super wealthy such as access to private market investing. AWMs that can offer a far more varied and potentially lucrative product suite to their clients are far more likely to survive the next few years.?

Personalisation & Transparency?

Sometimes referred to as the ‘rewired investor,’ the younger generation wants a far more personalised service from their wealth manager and to be treated as a true individual.?

The PwC report found that AWM organisations will have to find ways to stand up to increasing scrutiny within the industry. As public interest in ethical and socially responsible investments increases, organisations will need to be far more aware of public perception. Transparency will be key here and investors are going to demand that AWM organisations are accountable for their actions, decisions and the outcomes they are producing for their clients. When selecting firms 48% of investors are now considering ethical business practices, 41% vision and integrity, 39% approach to inclusion, and 34% social purpose.

Empowerment

Now more than ever, investors want to feel confident about the financial decisions they are making. Thanks to the internet and the democratisation of information, investors are probably more savvy than ever. Whilst AWMs should embrace education of their customers, this also offers up a unique opportunity for them to better guide their clients through the plethora of information out there and be their trusted advisor whilst filtering this information during their decision making process.?

Conclusion

In the face of shifting investor expectations, AWM organisations must evolve or risk becoming obsolete. By embracing enhanced transparency, more personalised services, incorporating sustainable investing practices and finding a good balance between high-tech and ‘high touch,’ firms can position themselves as leaders in a rapidly changing financial landscape.Those that successfully navigate these shifts stand not only to survive but to thrive in a future where investor expectations will continue to evolve. Positively, this new wave of investors provides AWMs with a unique opportunity to capitalise on a whole new generation of investors.

Key Takeaways

• PwC's report foresees a doubling in the rate of turnover for Asset and Wealth Management (AWM) organisations by 2027, emphasising the imperative for adaptation or risk of obsolescence.

• AWMs must comprehend the changing landscape of investor expectations, particularly with the unprecedented wealth transfer from baby boomers to millennials, who exhibit a greater tendency to switch between wealth managers.

• This article highlights critical areas of change, such as the growing importance of Environmental, Social, and Governance (ESG) investing, the demand for digital accessibility, the appeal of private market access, and the necessity for personalisation and transparency.

• AWMs that adapt most quickly to these shifting investor expectations are far more likely to not only survive, but thrive.?