Wealth market to double to $500bn in just nine years
But a one-size-fits-all approach risks some managers falling behind
Customer demand for wealth management services is expected to surge to more than $500bn (£400bn, €466bn) by 2030 – double the size of the market in 2021 – according to research by global consultancy Bain & Co.
The firm found that wealth management has the potential to “help any parent company double market capitalisation”. But this could become difficult due to emerging customer segments with different priorities which require offerings, delivery and economic models that fit them.
That is why Bain & Co believes wealth managers should bolster their efforts to attract younger clients – especially those born between 1981 and 2012 – since as many as 250 million of them are expected to have an annual income of over $100,000 by 2030.
The consultancy also projects a $90trn increase in liquid assets from investors globally by the end of the decade, with $40trn coming from individuals with assets between $100,000 and $1m.
In terms of geographies, the Americas and Asia Pacific are expected to lead the way.
“New younger customers are more self-directed and self-educated,” said Markus Habbel, partner at Bain & Company and leader of the firm’s wealth and asset management work.
“While, overall, these emerging customers want digital delivery, for their most difficult decisions they want human interaction, requiring a high-touch hybrid approach.”
In terms of investment priorities, there are four areas the consultancy believes will become prevalent by 2030:
- ESG – 75% of millennials consider this to be an important factor in investment decisions, as these assets are expected to make up 46% of all AuM by the end of the decade, up from 33% today;
- Private markets – their growth and outperformance of public markets is expected to attract greater attention, with wealthtech firms broadening access to private equity;
- Digital assets – advisers forecast to invest between 1% and 5% of their clients’ portfolios in the asset class within the next five years;
- Retirement solutions – the shift from defined benefit to defined contribution is driving the need for innovative decumulation strategies that will allow wealthy clients to maintain a comfortable standard of living.
According to Bain & Company, the wealth firms that will succeed in the ever-evolving sector will need to consider changing their business models to include greater digital offerings and channels; focus on an all-encompassing financial advice proposition to clients; and tailor their services according to client segments.
Commenting in the Bain & Co research report, JM Finn chief executive Hugo Bedford said: “We would challenge the notion that the next generation will move managers once they’ve inherited wealth. A good wealth manager should go to great lengths to get to know the next generation, as their needs are wrapped up in the life plans of their existing clients – this instils loyalty and, importantly, an understanding of the benefits of having someone to talk to, who knows you and who is fully accountable for your portfolio, when times are tough or different.
“It is this kind of relationship building that engenders trust and loyalty and which the wealth management community has traditionally offered, and which is in stark absence from a DIY service or platform.”