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The concept of wealth and wealth creation is not new to our world. Wealth management has existed in some or the other form for centuries even though the contours have been evolving.
The family controlled financial advisory group Rothschild claims to be at the centre of the world’s financial markets for more than 200 years. About two centuries ago, the five sons of Mayer Amschel Rothschild set out for the then main financial centres of Europe – London, Paris, Frankfurt, Naples and Vienna- to establish their great banking houses.
JP Morgan also has a legacy that of over 200 years. It was set up in 1799 in New York as a financial institution and it is now an established name in the world of finance. The American multinational banking and financial services company Wells Fargo was founded in 1852. Goldman Sachs, another strong name in the field of financial services including wealth management was founded in 1869.
It was in 1933 that the term ‘wealth management’ was used for the very first time. It was in that very year a securities Act was passed in the US following a fraud by Kreuger and Toll on reporting of assets. This also paved the way for mandatory audits of public companies.
The face of wealth management has been evolving over time. Today, clients- both institutional and individual- are not only looking for expert advice on stocks or bonds or other instruments. These are widely available online and for free. You can also bank on robo-advisers for the same. Gone are the days when regulatory framework and margins were the only key challenges facing wealth managers. Clients’ near blind trust and loyalty in their wealth managers is also a thing of past.
The economic crisis of 2008 shook the faith of loss struck clients in large wealth management firms. This necessitated a shift in the modus operandi of wealth managers as there was a greater demand for safer, more personalised and customer centric services.
Today, clients seek greater transparency, confidentiality, a higher sense of control, they need a greater understanding to take decisions. Client expectation is evolving due to technology advancements. With the entry of younger high net worth individuals, wealth managers need to offer them a capacity to analyse through digital experience. The new generation of wealthy are not only younger, a number of them are women and come from diverse ethnicities. Their expectations are also diverse.
Overall, the expectation from wealth managers is changing. So, clients are looking for knowledge and involvement before bringing on board a professional manager who can offer a tailored and personalised service. Digital changes offer clients a new experience and an opportunity for competitive differentiation to wealth managers.
Improvement in technology allows wealth managers to offer a greater range of avenues for investment to clients, backed by more elaborate data. Ecommerce is changing the way one buys products and services. In wealth management too, clients are developing better understanding of products and creation of different portfolios due to the growing use of ecommerce.
Wealth managers need to digitise to profitably serve the demands of the discerning and younger clients. Wealth mangers will need to adopt better pricing models that are less complex.
Increasing regulation and cost challenges will drive wealth managers to innovate and package their services more effectively so as to differentiate themselves from the non traditional competitors such as robo-advisers. These automated advisory services are slowly gaining a firm foothold and are eating away some of the market share from tradition wealth managers.
The new generation of wealthy clients are showing a preference for online and automated services. The wealth managers need to innovate to reach out to these set of individuals, acquire and retain them.