A global survey of advice practices from UK-based consultancy bfinance reports the most significant shifts in the industry relate to new technologies being adopted, a trend towards impact investing and further incorporation of alternative investments in client portfolios.
According to the findings 87 per cent of advice businesses have added new technologies for client usage within the last three years as firms innovate to maintain market share, with 90 per cent suggesting they’ll do so within the next two years.
Cost efficiency is a priority for wealth firms, the survey states, with 46 per cent reporting a measure of fee compression over the last three years and only nine per cent saying they had increased fees in that span.
“Wealth managers are under real pressure to create high-value, differentiated product offerings as well as find new scale-driven efficiencies that can support profitability,” says bfinance senior director, Kathryn Saklatvala.
“Perhaps the most widespread current trend among wealth managers is the introduction of new technologies: we are watching with interest to see whether digitisation can help to deliver the magic combination of scalability and true personalisation that many of these firms seek to achieve.”
The consultancy also notes a significant trend towards ESG and impact investing. Over 50 per cent planned to integrate ESG investment across all wealth strategies, 35 per cent are looking to create specific ESG offerings and only 10 per cent report they have no plans to integrate ESG.
Wealth management firms are also expanding the rang of investments available to clients, bfinance says, with alternative assets taking up more space in portfolios than previously. More than two thirds (69 per cent) have added new asset classes in the last three years, with 52 per cent saying they would do so over the next two years.
While alternatives have become particularly prevalent, 63 per cent of wealth managers say they have reduced their allocations to fixed income in a reflection of the low rate environment.
The surge of passive investing is also slowing down as the market reaches saturation according to the survey; only 21 per cent of wealth managers intended to increase their use of passive strategies in the next two years, down from 50 per cent in the last three years.