New Wealth Management Trends to Impact the Economy

The recent trends in wealth management show opportunities for wealth managers and challenges facing the industry, requiring wealth managers to prepare and position themselves.

FREMONT, CA:As the world recovers from the effects of the pandemic, inflation is taking center stage. This is critically affecting how wealth managers think, invest, and operate. There will be numerous challenges, but at the same time, there are opportunities for those who adjust and adapt to new developments.

High Inflation Affecting Economic Growth

Inflation was a result of disrupted supply chains from the pandemic lockdowns, geopolitical tensions, worker shortages, printing more money during the pandemic, and recovering demand from the COVID-19 lows. Inflation at persistently high levels threatens economic growth. And such events still impact the economy and the wallet of the average consumer.

Hedge Against Inflation

Identifying safe and reliable investments is a challenge in the contemporary environment as inflation affects consumer spending and corporate earnings. In the face of rising interest rates, once-hot performers like real estate have begun to show signs of cooling. The World Bank predicts that prices will continue to decline, even for gold. Although there is no quick and easy win, there are research opportunities, including in energy and select stocks and bonds.

As energy demand recovered following the pandemic, geopolitical tensions caused oil and gas prices to rise as supply chains were disrupted. Consumers lost, but oil and gas producers won, enjoying significant profits. With high oil and gas prices, energy stocks will continue to perform well. Energy is prone to boom-and-bust cycles. Furthermore, with a lot of activity in the energy sector, there will be investment opportunities.

The Continuing Crypto Crash

Although bitcoin hit its peak in the previous years, it showed signs of cracking. Bitcoin has lost a drastic value from its high. Moreover, cryptocurrency market capitalisation has radically dropped, making it the biggest collapse of an asset in financial history.

Wealth Managers Invest in Private Equity and Vice Versa

Wealth managers investing in private equity and PE firms investing in wealth managers is a symbiotic relationship, with both sides having opportunities to invest in the other. Private equity firms recognise there is so much capital, and more PE firms are marketing themselves to attract that capital. As private investments have outperformed their public counterparts, smaller and medium-sized wealth managers will have more opportunities to invest in PE.

On the other hand, PE firms return the favour and invest in them. Private equity investing has driven record levels of consolidation in the wealth management industry. Additionally, for wealth managers, private equity ownership indicates an injection of resources and expertise, allowing them to deliver new products and services to their customers.

The recent trends in wealth management show opportunities and challenges encountering the industry, and companies should observe these trends to develop a strategy around investing, operations, technology, client servicing, etc. Regardless of the challenges, there is an opportunity for wealth managers, and they should prepare and position themselves accordingly.