Outlook for Wealth Management in 2023

Wealth management is looking for innovative ways to attract clients and profit from development and technology and this is enabling businesses to successfully expand their hybrid and digital advice offerings.

FREMONT, CA: Wealth management is a holistic approach to financial planning for high-net-worth individuals, incorporating sophisticated investment management, estate planning, tax planning, retirement planning and more. It is a personalised approach to advising on all aspects of financial planning and managing the various financial aspects of a client’s life.

Artificial intelligence

As technology continues to evolve, many wealth management firms will incorporate AI into their processes to reduce cost, increase speed and accuracy, and gain insights from customer data more quickly.

ESG/SRI investing

The importance of environmental, social and governance (ESG) investing is gaining ground, driven by younger generations. ESG/SRI investing is becoming increasingly popular with wealth managers and is projected to be a major trend in the near future.

Impact investing

Another trend that is likely to take off in 2023 is impact investing. This is an approach to investing that focuses on investments that have a positive environmental, social or governance impact.

Increased focus on cybersecurity

With more and more data kept online, it is essential for wealth management firms to make sure their clients’ information is secure. Wealth managers will continue to focus on improving their security measures and defending against cyber threats in 2023.

The workplace is a promising opportunity for advancement

The wealth industry has long struggled to acquire lower-net-worth clients profitably. Employers, for their role, are emphasising their employees' financial well-being. Wealth managers provide financial education and seminars to businesses in exchange for the ability to generate high-value leads, typically from middle and upper management of such organisations, and acquire new clients at a low cost.

The future of wealth is for female

Women make up more than forty per cent of the world's high-net-worth individuals, a figure that is expected to rise significantly in the coming decade. The most significant driver will be demographic changes, as baby-boomer men die and pass control of their household wealth to their spouses and daughters. This will be one of the most significant growth opportunities over the next decade, and when it comes to investments, women are more risk-averse and focused on their life goals because they are expected to live longer and outlive their partners. They are also less confident in their investment abilities and expect their wealth managers to become more involved and offer more advice. The winners will reconsider their approach to serving women and develop a new strategy.

Advancing the development of hybrid models

The wealth industry has been preparing for the next evolutionary stage. Wealth Management and Technology have progressed to the point where they can provide personalised digital products and services while also profitably serving lower wealth segments and providing a smooth digital experience to all clients. Investors want to do things differently now that advisers are retiring. Wealth managers who do not prepare for this change will fall behind as digital-first and hybrid propositions become more popular across all client segments. In recent years, the success of new digital brokerage platforms in attracting first-time investors with small assets has been highlighted. While this segment is expected to grow over the next decade, wealth managers must adapt to win across all client segments.

Differentiation is essential as private markets expand

For the wealth industry, private markets continue to be a key area of client demand and a structural growth opportunity. Wealth managers must find ways to distinguish their product and advice offerings as well as their processes as private markets become more mainstream. Successful wealth managers will give their ultra-high-net-worth clients access to niche, thematic, or ESG impact-focused funds in addition to top-tier funds and direct co-investment opportunities. Financial advisors must diversify their Fund-of-Fund offerings across asset classes and vintages in order to reduce concentration risk for their wealthy clients and grow their clientele. They must also offer more liquidity, such as through secondary trading options.