At the City of London Wealth Management Awards organised by Goodacre, Keith Mc Donald, EY Partner, provided a very interesting view of the UK Wealth Management market, focusing on both the current and future situation.
In 2020, the market has continued its growth in terms of assets but experiencing lower profitability.
Keith forecasted further mergers and acquisitions on the market affecting not only wealth management advisory firms but also between software vendors and outsourcing platforms serving the wealth management players.
He illustrated how the traditional players in the financial landscape are vying to defend and expand their competitive value chain. Wealth managers, for instance, are seeing their market converging with high-end advice market, and can benefit from advice firms outsourcing investment proposition to enhance customer relationship.
For execution-only services, the growth of more confident tech-savvy investors can represent an opportunity, along with the emergece of robo-advice models with potential to address the advice gap in a cost-effective way, even if the adoption rate is slow.
IMPACTS OF COVID
The pandemic caused by Covid-19 has obviously been bringing relevant consequences, both in the short term and in a longer perspective.
For firms, the impacted areas concern their sales effectiveness, service models and operations, risk control and regulation.
In the long term, financial institutions will need to implement new products and services, re-defining their operating models to fit the changed investment landscape and investors’ requirements.
On risk, firms should re-calibrate the control and data security environment to support a full digital&remote process enabled operational model, aiming at establishing their future operational resilience strategy.
Finally, engaging with Regulators and Government Bodies to re-prioritise the change portfolio to deliver regulatory and strategic priorities.
Above all these aspects, a continued focus on customer interactions to maintain trust will be critical, particularly as relationships may be challenged by losses on investment portfolios or operational issues.
THE LONG-TERM STRUCTURAL TRENDS
Keith underlined that in the next future, business will focus more and more on sustainable investments. There is a growing demand from customers and in the UHNW space for an investment framework combining philanthropy and sustainability.
Investors will be looking for enhanced experience on how they consume and purchase services. In volatile markets, the need to demonstrate value for money won’t stop to grow, and the long term societal effects of the pandemic will bring a rebalancing of focus between financial and human return. In other words, ESG.
On technology & innovation, the increased propensity of clients to be serviced digitally will lead many firms to invest in the next years in transforming their IT and service platforms. The IT change will not be just about the digital and front office layer, but also the middle and back-office solution to improve business agility and lower total cost of ownership. The use of data, analytics and AI in investment processes will enable firms to identify and capitalise efficiencies.