Reimagining wealth management for the 2020s

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The world is currently in the midst of rapid change. Fuelled by technology, the pace at which innovative products and solutions are being introduced in the market is unprecedented. In the midst of this metamorphosis, the way wealth is managed and acquired is changing. In his book The Road Ahead, Bill Gates said, “We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next 10. Don't let yourself be lulled into inaction.”

Recognising and catering to the changing imperatives of the wealthy has become essential to the survival of wealth management firms.

Looking back at the decade
 Wealth managers traditionally focused on product recommendations and paid little attention to providing holistic solutions. This meant that investments were made in isolation, and little heed was paid to overall portfolio goals or how one investment in the portfolio interacts with the other investments in the portfolio. Little consideration was given to investment policy statements (IPS) and the multiplicity and diversity of goals. It was also an age of cumbersome paperwork and tedious execution. To that end, the entire wealth management process lacked a robust structure.

Let’s get contemporary
The narrative has shifted to offering comprehensive solutions with a focus on wealth preservation. Trends now include the transfer of wealth from one generation to another; baby boomers moving into retirement are passing on their wealth to the next generation of investors.

The needs of millennials are in sharp contrast to those of baby boomers—they can range from being absolutely whimsical to perfectly staid. Additionally, their attitude towards managing their finances and expectations of client experience are markedly different. A breed of young entrepreneurs is growing at a fast clip. As per the IIFL Wealth Hurun India Rich List 2019, the top five fastest creators of wealth were unicorns while the average age of the top five gainers in the list was 36 years. This presents a unique opportunity for wealth management firms.

Technology is also playing an increasingly important role in the industry. Clients expect firms to deliver innovative and customised solutions in the most efficient, read click-happy, way.

Not really crystal gazing
While firms in the financial services space are currently leveraging technology to provide their clients with optimal solutions and services, there is still much to be explored. As we move up the learning curve, we will see newer models and tech partnerships in the industry that will focus on catering to the nuanced needs of the wealthy.

However, it is important to remember that even as we migrate to an era of high-tech solutions, the wealth management industry will continue to be a high-touch business where a maximum premium is placed on fostering enduring relationships, built on a foundation of trust.

You are truly wealthy, not when you have a lot of money, but when you have a lot of time. The wealth manager of the future will have to help their clients manage their money in such a way, that they need not worry about their portfolios and have enough time to pursue their chosen proclivities.

The writer is, Executive Director of IIFL Wealth and Asset Management.

The thoughts and opinions shared here are of the author.