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Redefining the Financial Advisor

Redefining the Financial Advisor

Welcome to the latest edition of Maveric’s Banking E.D.G.E. newsletter, where we translate complex industry trends into actionable insights for banking innovation. As we navigate through 2024, the financial advisory landscape is profoundly transforming.

Here is a quick roundup of six pivotal trends reshaping the industry and how forward-thinking advisors can leverage these changes to deliver unparalleled value to their clients.

1.) The Digital Revolution in Client Acquisition

The traditional lead generation playbook is experiencing a seismic shift. Financial advisors are now at the forefront of a digital revolution, leveraging sophisticated social media advertising and virtual sales processes.

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Actionable Takeaways:

  1. Develop a robust social media strategy focusing on platforms where your target clients are most active.
  2. Invest in virtual meeting tools and create engaging online content to attract and retain clients.

2.) Mastering Economic Turbulence

Financial advisors’ role as trusted guides has never been more critical in an era of unprecedented economic volatility.

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Actionable Takeaway:

  1. Implement regular, personalized communication strategies to keep clients informed and reassured.
  2. Develop and showcase your expertise navigating volatile markets through webinars, newsletters, or one-on-one sessions.

3.) The AI-Powered Advisory Revolution

Artificial Intelligence is rewriting the rules of financial advisory, from predictive analytics to hyper-personalized investment recommendations.

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Actionable Takeaway:

  1. Explore AI-powered tools that can enhance your decision-making process and improve efficiency.
  2. Consider partnering with fintech companies to integrate AI solutions into your practice.

4.) The Financial Literacy Imperative

Financial literacy has evolved from a nice-to-have to a must-have in the fintech era.

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Actionable Takeaway:

  1. Develop a comprehensive financial education program for your clients, including workshops, online resources, and personalized coaching sessions.
  2. Use gamification or interactive tools to make financial learning more engaging and accessible.

5.) The Rise of Sustainable and Ethical Investing

Sustainability has become a central pillar of modern investing strategies.

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Actionable Takeaway:

  1. Gain expertise in ESG investing through certifications or specialized training.
  2. Develop a framework for integrating ESG criteria into your portfolio construction process.

6.) Navigating the Regulatory Maze

The regulatory landscape is evolving quickly, presenting challenges and opportunities for agile advisors.

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Actionable Takeaway:

  1. Implement a robust compliance management system to stay ahead of regulatory changes.
  2. Consider partnering with legal experts or compliance consultants to ensure your practice remains compliant.

Charting the Course for Future Success

The financial advisory industry in 2024 stands at the cusp of a new era defined by innovation, adaptability, and client-centricity. Visionary advisors can thrive in this dynamic environment by embracing cutting-edge technologies, prioritizing client education, and navigating economic and regulatory shifts skillfully.

Citations and Further Reading

  1. Empaxis
  2. Indian Economy Market
  3. CNBC
  4. Morning star
  5. Kaplan Financial
  6. Finance Yahoo
  7. Broadridge

 

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ESG & Alternative Assets – Impact on Wealth Management Investment Strategy

ESG & Alternative Assets – Impact on Wealth Management Investment Strategy

Changing Business Environment

Economic headwinds in the US, UK, and EU – high interest rates and liquidity tightening – have impacted the wealth management (WM) industry. After years of sustained growth, global AUM saw its first decline (10%) in 2022, driven by falling markets. New business flows, and average Client Business Volumes (CBV) also declined in 2022.

This decline coincides with a surge in US investor preference for passive investments, further eroding the fee-based income. WM firms are eyeing diversification into new offerings with better margins to counter shrinking growth and profitability. This strategy aligns with evolving customer demand for newer asset classes, such as ESG-compliant investing and alternative assets.Changing-Business-Environmnet-Impact.

Diversification Into New Asset Classes

  • ESG-Compliant Investment: Driven by rising social consciousness and the potential for regulatory risks with non-compliant businesses, Environmental, Social, and Governance (ESG) compliant investing is emerging asn a key priority for investors. Significant advances in energy transition to clean energy sources have also opened new avenues for profitable investment.

    Research reports indicate that institutional investors plan to significantly increase their ESG holdings, with global ESG investing set to exceed US $53 trillion by 2025. Two-thirds of HNW investors consider ESG scores before making investment decisions. require specialized platforms for launching ESG related products & offerings and keeping track of ESG investments. They also need to acquire capabilities for ESG investment opportunities related data collection, analysis, identifying investment opportunities, risk measurement & tracking in terms of ESG performance, and regulatory & client reporting.

  • Alternative Assets: assets like Private Equity, Private Credit, Private Real Estate, and Digital assets like Cryptocurrencies, NFTs, and Tokenized Passion assets (Art, Wine, Nature) etc. – are emerging as a preferred investment option to Ultra High Net worth & High Net Worth investors seeking diversification. While carrying high risks, they provide significantly higher returns for investors with deep pockets & a higher risk appetite. Globally, alternative assets now account for over a fifth of total AUM, contributing half of the industry’s revenues.

    Within Alternative Assets, Private equity has been popular following the recent liquidity-driven repricing and valuation corrections. While digital assets like cryptocurrencies remain volatile, interest in safer tokenized real-world assets (RWAs) is growing.

    Alternative assets are inherently complex—liquidity, regulation, and pricing create unique challenges for WM firms. They’ll need specialized advisor talent and the technological infrastructure to manage this asset class and address client expectations effectively.

Acquiring ESG & Alternate Assets Investing Capabilities

Organic-Inorganic-Growth

While diversification into these new asset classes through organic growth is an option, considering the specialized talent and technology platforms required to advise on & manage these asset classes, and time to market, WMs are looking at Mergers & Acquisitions (M&A) as a serious alternative. Both in the US & Europe there is increasing interest in acquiring additional capabilities, customers & markets through M&A. M&A activity surged in 2021-2022 in both the US and Europe as firms targeted the capabilities, clients, and markets to accelerate their diversification.

Some Examples include:

Acquiring-ESG-Alternative-Assets investment capabilities presents an opportunity to WM firms to grow their business & also avenues for increasing fee income.

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Unlocking ROI: Mastering Hyper-Personalization in Wealth Management

Unlocking ROI: Mastering Hyper-Personalization in Wealth Management

With the rise of advanced analytics and digital capabilities, firms can now deliver real-time, personalized insights and meet clients’ increasing demand for tailored experiences. Hyper-personalization is thus a critical imperative in today’s competitive market, but its implementation is fraught with challenges – from understanding client personas to tech requirements and data privacy. Our unique, industry 1st, framework helps address these challenges and provides a roadmap for delivering impactful client experiences, whether through real-time personalization or product-persona-journey interventions.

Our Industry-First Framework Our framework is rooted in proprietary principles and a unique methodology, and is committed to revolutionize client experiences.Our Industry-First Framework
ROI Impact Our framework isn’t just about enhancing experiences; it’s about driving tangible business outcomes. For e.g.: A minor shift in metrics (1% point in open rate, 0.4% point in click rate) can lead to a significant increase in AUM (USD $1.14mn) within 6-8 months, showcasing the power of our approach.
ROI Impact

In Conclusion In an industry marked by evolving client expectations, our framework emerges as a game-changer. It’s not just a tool; it’s a strategic intervention set to reshape the wealth management landscape.

Dive deeper into our framework and its transformative potential by listening to our Podcast on the same topic here.

Maveric’s thought leadership series – E.D.G.E (Experiences Delivered by Global Experts) – handpicks the game-changing technology ideas and pressing functional questions Banks and financial institutions must solve today.  

These features – reports, whitepapers, podcasts, flyers, blogs, and infographics – are for Banking leaders and Technology evangelists to apply profound trends, the latest opinions, and transformational analyses to boost the performance of their organizations.

To get more updates, subscribe to our Monthly Newsletter

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AI in Wealth Management

AI in Wealth Management

Insights on Banking Technology Inspired by the Latest News, Studies & Events Stay updated with the best and brightest from the world of Banking!


Chat GPT in AWM – Accelerating Next

Recapping the narrative from our previous feature – BEST PRACTICES IN AWM – the strategy paying off for the Tech companies in the AWM space has the following FOUR IMPERATIVES:

While composable cloud-native platforms must be constructed on a 360-degree ‘customer- ecosystem – technology’ construct [refer to below graphic], this companion piece focuses on the fourth point – recent advances in AI-intelligent systems (or specifically Chat GPT in AWM)

New AWM consumer models (On Demand Streaming, One Click Purchase & more)

In January 2023, within 60 days of its launch, ChatGPT (a popular chatbot from Open AI) topped out with 100 Mn monthly active users. TikTok, the previous record holder, had taken 27 months. Pair this stat with another.

In a McKinsey study, by “2030, 80% of new wealth management clients will prefer advice in a Netflix-style model” – data-driven, hyper-personal, continuously, and potentially by subscription.

Connecting the two begins to portend what the AWM future may look like.

But how is ChatGPT different from its predecessors?

We asked ChatGPT how I can use it to create wealth. It responded along common sensical lines – financial education, market research, etc. 

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We asked ChatGPT if it would make investment advisors redundant.

Its cautious response was factually relevant (human empathy, complex markets…)

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While GPTs will accelerate money analysis and decision-making, early adopters discuss several limitations.

 

In sum,

In these early days, critics warn us – that trained on internet data, ChatGPT is open to human biases, lacks human morals, is prey to misinformation, and can easily exploit competitors’ confidentiality.

For now, though, AWM firms can begin examining their Tech strategy by – Developing an internal GPT AI Strategy.

OpenAI has made the “brain” of ChatGPT available to the citizenry through APIs. With open minds, leading FIs must study how tech companies and programmers can access the power to build their domain-and-product-specific customer applications.

We asked ChatGPT if it would revolutionize wealth management.

It said, “I can provide some insights, but I can’t predict the future with certainty.”

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We agree.

For the moment, our world views match! 

To get more update, subscribe to our Monthly Newsletter

 

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Accelerating Next in the AI-Enabled Wealth Management Market

Accelerating Next in the AI-Enabled Wealth Management Market

Asian households with investable assets of $100,000 to $1Mn are projected to hit $4.7 Tn in 2026 from $2.7 Tn in 2021. The McKinsey report further says that for banks and wealth managers, the potential incremental revenue of $20 – $25B equals half of Asia’s industry’s revenue growth in the next three years.

History’s lesson – make bold moves and invest early – calls for an innovation mindset

In sum, From harnessing the tailwinds to catapult into pole position, using the industry challenges to create opportunities will mean three growth actions:

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