Inside modern wealth mindset: evolving trends in wealth management reveal priorities of the affluent
The work of asset managers is complemented by technologies, including AI. A number of processes are being automated, they are becoming faster and more standardized. Already, generative AI allows creating "co-pilots" for financial advisors - routine but time-consuming tasks are automated: opening accounts, checking legal documents, etc.
The fintech industry and its investment branch, wealthtech, are actively gaining momentum. According to FT Partners, as of June 2023, there were more than $4 trillion under management of technology solutions (through investment platforms and robo-advisory services). Similar to many markets, the question has become relevant in the wealth management industry: how soon will humans be replaced by robots?
However, in wealth management, things are not so linear - the market is changing not so much because of technology as because of new demands and needs of the target audience. Moreover, it is these new demands that are pushing the technologization of the financial market.
The authors of Capgemini's World Wealth Report Series 2023 identify several main categories of wealthy people by the size of their capital: High Net Worth ($1m to $5m), Very High Net Worth ($5m-$30m), and Ultra High Net Worth ($30m+). VHNW and UHNW are mostly entrepreneurs with an average age of 65.4 years and a net worth of about $77.7 million. An inherited wealth dilemma has emerged for many self-made individuals as 85% have earned their money independently and must now consider how to pass on their estate to family.
UHNWs invest in various asset classes and have complex, diversified investment portfolios. They are actively interested in the modern technology industry - not only as investors in technology companies, but also as consumers of fintech services.
89% of the wealthy people surveyed by the authors of the study admitted that they spend at least three hours of personal time online every day. UHNWs have a high level of digital literacy and are interested in various innovations in the wealthtech industry. According to the British company 11FS, by the end of 2024, up to 25% of the asset management process will be carried out through apps.
Wealth management companies have already stepped up their cooperation with app developers to meet the demand of clients for digitalization of the investment process. Some applications allow investors to access the best investment offers from a partner network of a large number of asset managers from different companies, as well as to meet the needs related to trust services, tax residency, inheritance planning, and legal support for certain transactions.
The interests of the very wealthy go far beyond investments and classical finance. According to a study by Ten lifestyle group, more and more Ultra High Net Worth individuals are looking for safe places and conditions for themselves and their families due to high turbulence and uncertainty in the world. This involves moving, settling in new cities and even on new continents, purchasing real estate, organizing education and leisure, quickly and harmoniously integrating into local communities of people of equal wealth, values and interests, etc.
For UHNWs, it is important that the management of these processes, as well as financial transactions, become convenient and fast - ideally, in a few clicks in a mobile application. Products that partially meet these needs are already being developed. These include apps that allow clients to manage their payments and use virtual concierge services, make cashless payments despite limits and restrictions, access elite events in new cities, plan trips, and invest in art and luxury goods.
Almost one in two UHNWs collects works of art. Digitalization has also affected this process. In particular, Sotheby's is actively working to improve its app, which allows customers to follow auctions and lots, place bids in real time, and make payments online.
In the context of technology development, the main request of the wealthy is to maximize the digitalization of not only wealth management, but also the organization and maintenance of the life they can afford thanks to their wealth. From elementary procedures to complex and multi-component actions that require a deep understanding of the individual needs of a particular client. Despite the abundance of technological solutions in this area, many of them fail because they cover only a part of the spectrum of needs of the target audience.
Ultimately, the winner will be the one who can build an ecosystem where wealth management and lifestyle are intertwined, creating synergies between financial well-being and quality of life.