14 July 2023

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Wealth management for everyone

Luigi Campopiano

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In a report, "U.S. wealth management: A growth agenda for the coming decade," published by McKinsey & Company in February 2022, the authors note that the world of wealth management is undergoing significant innovation and experimentation that will reshape its paradigms in the next decade. 

According to the strategic consulting firm, four factors will be at the forefront of this important change. The combination of these elements signals an even more significant phenomenon, referred to as the democratization of wealth management.

1. The rapid growth of new client segments. This pertains to the composition of wealth clients, particularly the role of women. In 2021, over one-third of private wealth — nearly $12 trillion — in the U.S. was held by women. Over the next decade, this figure should increase, primarily due to demographic factors. By 2030, over 30% of wealth held by American baby boomers will belong to women, amounting to a transfer exceeding $30 trillion.
   
   
2. Evolution of demand. Investors are seeking solutions that integrate traditional banking services with wealth-related services. This trend aligns with the demand for personalized services and the digitization of usage and interaction methods, which are already transforming client-professional relationships. According to the report, digital channels are the preferred choice for high-net-worth clients, not limited to younger generations.
   
   
3. Attention to new types of wealth assets. This includes alternative assets, such as private markets, traditionally reserved for large institutional investors. According to the report, investments in this sector are estimated to reach between $500 billion to $1.3 trillion by 2025. Facilitating client access to this asset class will be crucial for wealth managers.
   
   
4. Emergence of new business models. Technology plays a significant role with the development of software and platforms for wealth planning and management. These tools will enable professionals to create synergies across different areas of specialization.

The democratization of wealth management presents an unparalleled business opportunity. Rapidly changing client needs, evolving and stringent regulations and new market competitors drive innovation, personalized services and increased scalability. 

The demand for hybrid solutions with two distinct characteristics is growing: a mobile-first approach and seamless digitization of services, effectively combining industry expertise, data analysis and technological tools.

In response to the motto "demand creates supply," new service providers are entering the market, accelerating the transformation processes in wealth management. Financial institutions are experiencing the most significant changes in decades. 

To successfully adapt, investment is required on multiple fronts, including creating a unique customer journey with elevated levels of personalization, enhancing the digital customer experience, and leveraging the opportunities presented by technological innovation.