Trends Reshaping Wealth Management Sector

To cope with the formidable transitions taking place in the wealth management space, on a consistent note, technology frontiers in the sector are adapting to trends, thereby, staying on top of the competition table.               

FREMONT, CA: The wealth management industry has bloomed in recent times, especially to tackle geopolitical tensions, global conflicts, inflation, and a soaring recession across the world. This, in turn, has underlined the need for the efficient functioning of wealth management firms—reduced assets under management (AUM) growth may typically strain profitability in the arena. An intensified competitive pressure is enabling a consistent evolution of client demands towards new products and services like private markets, personalised advice, and seamless omnichannel experiences.

As a result, wealth managers in the current scenario strongly rely on the recalibration of business models and accelerating structural reform efforts, in addition to the consistent risk of falling. One such approach to taming the wealth management sector for a more productive space is the comeback of deposits on a larger scale, where deposit beta often accelerates the exposure towards the threat. Wealth managers are highly influenced by robust interest rates and net interest income growth, especially with the deposit pools becoming increasingly productive in recent times.

A delayed pickup in deposit beta is critically observed in current periods per the soaring rate cycle, thereby passing on the share of margin to clients via the pricing scale. Therefore, strengthening deposit-management capabilities often encompasses pricing and modelling and is critical and paramount for wealth managers aiming to remain at the top of the competition table.

Additionally, conditions in recent times have provoked a more capable space for pricing and discount management, where significant discounting in rack rate pricing has slowed down the role of wealth managers in past periods. For instance, a misalignment of pricing with cost-to-serve opens up unprofitable scenarios in wealth manager-client relationships, underscoring the need to harness and arrange pricing in an organised pattern. A well-established profitability rate on an aggregate level critically builds and strengthens large and profitable client relationships.

Pricing management is a critical asset for wealth managers in protecting their general competitiveness and profitability. Hence, fees ought to be substantially aligned with market standards, scrutinising discount levels and processes on an effective note to ensure the efficacy of the wealth management process and, thereby, attaining sustainable revenue outfits. Alongside this, running projects to identify clients with high and outdated discounts, performing discount reviews, redefining discount governance and processes, and implementing dedicated processes in addition to consistent reporting and impact analysis processes ensures success for wealth managers. This long-term revenue increase can be calculated on an annual basis, alleviating critical bottom-line pressure and enhancing financial growth investments.

Meanwhile, a crucial cost transformation likely transforms the pre-established agenda in a sector, emerging as a priority factor in the arena.