January brings predictions and resolutions. Predictions for the year ahead typically address the outlook for markets, industries or politics. In contrast, resolutions tend to cover personal goals and initiatives — getting fit, starting new projects, or making other positive changes.
This year we’re using New Year’s resolutions to highlight key imperatives executives should consider in 2024 for the global wealth and asset management industry. Faced with an outlook of profound global uncertainty, increasing disruption and growing margin pressure, wealth and asset managers need to "get in shape" and build differentiated strategies for sustainable, long-term, profitable growth.
Here are the top 10 resolutions that industry leaders should be taking — or at least considering — as they aim for success in 2024 and beyond:
10. Involve investors in expanding and integrating services
As an organization or leader, we resolve to broaden our service capabilities, to develop holistic and integrated offerings and to strengthen this process through greater client involvement and co-creation.
Why:
Wealth and asset management customers across segments increasingly expect a holistic, bespoke service that is adapted to their needs and meets their requirements. Amid severe market uncertainty, they also seek greater guidance and reassurance.
What:
Firms are working to become more client-centric, to listen better to investors and to give them greater agency and control. In the wealth management arena, they are also broadening their service capabilities to develop a full financial wellness offering that manages clients’ investments, banking, health care and household needs. Increasing client involvement and using co-creation strengthens investor engagement, helps firms to be present at key moments in clients’ journeys and enhances loyalty and satisfaction.
How:
- Re-evaluate client personas and segments (such as female investors) to better customize and scale delivery, remembering the importance of wealth transfers – between spouses and generations — to boost client retention.
- Partner with other organizations to provide more holistic and non-traditional services (e.g., tax, trust, estate and health care) and use digital transformation to step up virtual connectivity.
- Involve investors in co-developing services — nurturing a “teach-me, join-me” dynamic — and allow them to select their preferred level of involvement.
9. Broaden investor access, increasing engagement and inclusion
As an organization or leader, we resolve to enhance investor access to a full range of products, advice, and education — increasing investor engagement and providing better outcomes to a larger pool of clients.
Why:
Changing investor demographics (owing to aging, urbanization, migration, increasing female economic power and growing personal responsibility for retirement) are creating more complex patterns of demand. A growing pool of prospective clients offers tremendous growth potential but brings far more differentiated needs.
What:
Wealth and asset managers are widening their prospective client pool and broadening investor choice while also trying to educate clients on the products and services becoming available to them. They are working to democratize access to investments, including alternative assets; for example, by tapping into the last decade’s growth in private markets. This gives firms new sources of revenue growth, while creating additional value via stronger engagement and outcomes — all for a larger group of investors.
How:
- Offer products traditionally limited to wealthy clients to mass affluent and retail investors, such as providing access to alternative asset classes and direct indexing capabilities.
- Develop the use of interval funds, business development companies, European long-term investment funds (ELTIFs) and long-term asset funds (LTAFs) as primary vehicles.
- Evaluate preferred commingled product vehicles, and the future potential of providing digital wrappers via tokenization.
- Implement tools and platforms to enhance financial education around complex products.
We are focused on how to ensure our clients understand the complexity of new products that they now have access to and a greater interest in, such as private capital.
C-Suite Executive, top tier North American headquartered global wealth management firm
8. Collaborate – and innovate – on regulation
As an organization or leader, we resolve to make better use of technology and innovation — and to partner with other market participants — to increase regulatory engagement, efficiency and quality.
Why:
Faced with varied regulatory regimes across different markets — and global investors with footholds across several jurisdictions — wealth and asset managers not only need to comply with a multitude of rapidly evolving rules, but they are also expected to handle regulatory complexities on behalf of their clients.
What:
Wealth and asset managers are developing a more consistent approach to regulation. At one level, firms are working to make better use of technology, data and innovation to increase flexibility, address growing compliance burdens, and meet both global and specific local requests. At another level, players are increasingly collaborating to develop industry-wide solutions.
How:
- Collaborate with peers and competitors to pool strengths and build collective frameworks, enhancing confidence in the ability to comprehensively comply with an evolving regulatory landscape.
- Take a transparent approach to new technology, including ethical artificial intelligence (AI); accelerate the adoption of digital wrappers, tokenization and distributed ledger technology; and advance environmental, social and governance (ESG) imperatives as an industry.
- Transform regulatory compliance through greater consistency and strategic innovation, instead of meeting evolving requirements through incremental additions.
7. Show transparent leadership on sustainability
As an organization or leader, we aim to develop a consistent, comprehensive and transparent approach to sustainability, optimizing investor alignment and taking an enterprise-wide view of implementation.
Why:
Wealth and asset managers face expectations to commit to more active participation in re-orientating global financial flows toward a more sustainable economy. In particular, the climate transition will become an ever-increasing area of focus. More broadly, firms need to ensure purpose-driven thinking in their activities and market investments, becoming active stakeholders and exhibiting leadership across ESG categories.
What:
With approximately 85% of assets under management (AUM) currently not green,1 firms are expanding their focus on climate to include the wider green and blue (marine) economies, as well as renewing their commitments on themes like food security and economically inclusive cities. Transparency is key to making tangible progress in partnership with asset owners, while avoiding allegations of “greenwashing” or politicization.
How:
- Develop a greater choice of thematic funds and increasing allocations to themes such as diversity, transition investing, biodiversity and the blue economy.
- Embed climate and environmental risks into strategy, governance and operations, and into investment products and portfolios — setting clear ambitions, scaling up sustainable finance and taking an iterative implementation approach.
- Understand how to have a real-world impact — not only in mature economies but also in developing markets. Blended finance, which entails blending public capital or funding by development financiers with private capital, will be critical to increasing wealth and asset manager's role in the climate transition, by taking first loss risk and facilitating at-scale mobilization of capital.
- Manage the whole firm in line with sustainability principles, including timely, accurate and transparent reporting to investors and regulators.
6. Optimize the value of talent
As an organization or leader, we resolve to maximize the value of new and existing talent through a strategic program of reskilling and upskilling — readying our people for changes in client demand, technology, products and industry practices.
Why:
Widespread talent shortages, coupled with rising expenses and competition from technology-enabled new entrants, are increasing the need for upskilled wealth and asset management executives. Attracting staff in emerging areas such as AI, and rapidly growing ones, like private credit, is important, but enterprise-wide talent enhancement is even more vital.
What:
Wealth and asset managers are trying to recruit people with specialist skills in areas such as AI and other advanced technologies. At the same time, they are seeking to empower staff and advisors so they are ready to work with new products, new technology and new business models and confirm that end clients understand the solutions, investment risks and potential outcomes.
How:
- Focus talent strategies on enhancing access to, and training for, key roles and more standardized positions by reskilling and upskilling existing talent.
- Realign talent based on their interests and strengths, with a continuous process to identify future skills needs and better leverage technology such as AI co-pilots and automation.
- Consider use of centers of excellence (CoE) and offshore delivery capability (which is no longer just a cost play but increasingly a capability play, too).
- Support staff members by offering a technologically-integrated work environment that streamlines operations and improves work-life balance.
- Be proactive about communicating the firm’s culture, values and purpose, particularly pertaining to ESG policies; prioritize empathy and human-centeredness.
