Goldman Sachs China Warning, Bracing for the Great Wealth Transfer, and more. — WealthTech Fusion, 8 Mar.

Welcome to our weekly newsletter. Here, key events from the WealthTech universe converge to meet your curiosity. Subscribe and enjoy!

What’s in:?

• The CIO of Goldman Sachs's wealth-management branch has warned against investing in China.
• Reseda Group reveals new FinTech investments.
• Forbes pins down five main challenges for wealthtechs.
• Top analysts, researchers, and wealth management professionals have outlined the setting and outlook of the sweeping “great wealth transfer” to hit wealth managers.
• Finovate’s David Penn shares insights on WealthTech from Finovate’s 2024 event.

See what’s up in the industry.

?? Funding & Investment Updates

Chief Investment Officer of 高盛 wealth-management business has warned against investing in China.

Despite recent stock market declines, Sharmin Mossavar-Rahmani cited concerns about China's economic trajectory, particularly in key growth pillars like the property market, infrastructure, and exports. She highlighted uncertainties in China's policymaking, including information security measures and data restrictions, contributing to a lack of clarity for investors.

Despite recent regulatory interventions and a rebound in China's benchmark index, Mossavar-Rahmani remains skeptical and recommends caution, emphasizing Goldman Sachs' stance against investing in China at this time.

Reseda Group , a MSU Federal Credit Union subsidiary, has invested over $6.2 million in the FinTech industry.

The funds were distributed across eight innovative companies, including CU LIFT Fund LLC , RevlTek , Debbie , Origence (Formerly CU Direct) , Members Mobile Inc. , and Ranqx , with additional follow-on investments in Ascent Platform and Changed App .

The investment aims to enhance the auto buying experience, provide college planning and education finance solutions, promote positive financial actions, increase loan volumes, boost financial wellness, and support community prosperity in small and medium-sized business funding.

Reseda Group's COO, Benjamin Maxim , emphasizes their focus on helping credit unions thrive through innovation and enhancing customer journeys by investing in solutions that facilitate digital relationships and empower financial institutions to serve their consumers better.

?? Bird’s Eye View

The $72 trillion global wealth transfer challenges private banks, with 70-80% of heirs considering new managers. How to prepare for it?

Learn what’s the perspective of Zita Nikoletta Verbényi , Founder & Legacy Aesthete at The Legacy Atelier? , Benjamin Cavalli , head of Strategic Clients at 瑞银集团 , and Chayce Horton , Senior Analyst at Cerulli Associates . Below is the digest of the insights they shared with Global Finance.

• With an estimated 70% to 80% of heirs potentially seeking new wealth managers, firms need to be proactive in meeting the changing demands of their clients and the unique challenges each family faces.
• The shift in focus from wealth creators to heirs presents both opportunities and challenges for private banks. To compete for clients and fees generated by the wealth transfer, banks may need to diversify their investment offerings, emphasizing alternative instruments like private equity that appeal to younger clients. Additionally, technological advancements will be crucial in attracting digitally savvy clients and providing personalized, 24/7 service.
• The greatest challenge lies in expanding traditional financial and legal planning roles to include broader family dynamics and governance. Banks must play a semi-therapeutic role in helping wealthy families navigate the complexities of succession planning, ensuring unity and common purpose across generations.
• Dialogue between parents and successors is essential, but cultural differences and taboos may complicate communication, particularly in regions like Asia. Independent thinking among heirs, both in terms of business succession and investment strategies, further underscores the need for banks to adapt their services to meet the preferences of the next generation.
• Family offices can provide an institutional framework for intergenerational wealth management, facilitating decision-making and reducing conflicts over inheritance. Collaboration between family offices and private banks can enhance services and support the diverse needs of wealthy families.

Tailored solutions, communication, and innovation are vital in navigating the upcoming wealth transfer avalanche.

Brace up, for this section is heavily packed this time ??

Next up, we have Forbes’s list of five challenges WealthTech faces right now by Adam Dell , CEO of Domain Money . These include the following:

• Ongoing management fees which can significantly erode investment returns over time
• A lack of comprehensive life planning by advisors
• An overemphasis on actively managed investments despite their poor performance track record
• Conflicts of interest where advisors are incentivized to sell products
• High minimum investment requirements which exclude many individuals from accessing personalized advice

A shift towards a more transparent and client-centric model is necessary to address these concerns and ensure that financial planning services are accessible and beneficial to all individuals, not just the affluent few.

Now, let's shift the focus to WealthTech and automation.?

Here’s a wrap-up on the talks on Finovate Europe 2024 from Finovate’s David Penn .

1. AI evolution and impact

Nina Schick 's keynote address highlighted key points regarding the evolution and impact of AI in financial services. The discussion emphasized the need to move beyond simplistic views of AI as either "dangerous" or "dumb" and to recognize its potential for driving innovation.?

The talk also highlighted the concept of "Artificial Capable Intelligence" (ACI) as introduced to bridge current AI capabilities and the aspirational goal of Artificial General Intelligence (AGI). ACI focuses on leveraging AI's intelligence to perform specialized tasks effectively, including emotional tasks. This nuanced understanding of AI's potential suggests a more constructive and realistic approach to its integration into financial services.

2. Funding trends and investment outlook

While optimism about funding was expressed, the discussion also highlighted the significant influence of interest rate policies on investment appetite and valuations. The debate on the likelihood of increased M&A activity underscored the potential for consolidation in the financial services sector, driven by both strategic transactions and private equity investments.

Areas of interest for investors included AI-powered automation, niche sectors like tax and accounting, as well as emerging areas such as InsurTech and WealthTech. However, challenges in the lending space were noted, particularly in light of recent interest rate hikes.

3. Innovation amid uncertainty

Despite challenges and uncertainties, the panelists noted that periods of crisis often foster innovation, with some of the best companies emerging during such times. The accessibility of launching new FinTech ventures was highlighted, suggesting that the next wave of innovation may be characterized by a more measured and purpose-driven approach. This sentiment reflects a shift from previous years' exuberance to a more deliberate focus on solving real-world problems in financial services.

Now you’re up to date with the key news ??

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Sources: Bloomberg, Global Finance, Finovate, Private Banker, and FinTech Global.