The wealth management industry has had a paradigm change in the last few years driven by changing demographics, more and more millennials joining the investing wagon, and rapid digitalisation. The year 2021 has been nothing less than a Midas Touch for investors. The equity market continued to soar to new highs, drawing a large number of first-time investors. Testimony to this fact is that demat account openings hit a record of 14.2 million in FY 2021.
Investors of today are more informed, have access to expert knowledge and tools and are actively planning for their finances. There is a growing trend towards being self-reliant rather than being dependent on parents for meeting lifestyle needs. A new generation of investors thinks differently about advice, brings new attitudes and expectations and also influences how older investors purchase and consume wealth services.
Increasing Need For Advice
Financial markets have become complex due to a wide variety of investments options available in the market today. Investors are often left confused regarding which products to invest in and how to determine the suitability of these choices based on their own risk-return profile. The need for an unbiased wealth manager, who can handhold and guide the investor suitably, has, therefore, increased manifold. Investors value holistic advice on how to achieve multiple, often conflicting, goals through a range of investment and funding strategies.
While this means new opportunities for the wealth managers, excessive competition has also posed new challenges to sustain, grow, and strive in the market. This is a challenging macro environment for investors and their advisors to find the right return-risk combination. Increasing regulatory burdens and rising costs of risk pose new challenges to wealth management firms and their parent companies.
Easy-To-Use Advisory Platforms
The rise in smartphones and internet penetration has exposed investors to the world of technology. Investors are now increasingly moving toward platforms that have easy-to-use interfaces where investments can be made with the click of a finger.
The urgency of digitalising the wealth management infrastructure has never been stronger. Digital wealth management is not limited to offering digital channels for transacting; it extends to using technology to offer greater value, professional service and improving the customers’ investment experience all in an unbiased way.
The rise of digitalisation has also given rise to robo-advisors, which are automated, algo-based systems that provide wealth management advice. These easy-to-use platforms have made the whole investment process accessible and affordable to a large section of people, thus bringing science and human combination in advisory models.
Big data and advanced analytics are transforming the industry with new ways to engage with new clients, manage client relationships and manage risks.
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