Wealth management trends to look out for in 2020Hampton Wealth
2019 was a pretty bumpy ride. There were trade tensions between China and U.S., sustainability-related factors affecting asset prices, a variety of issues in inequality that are connected with taxes and regulation, as well as a dovish central bank pivot that drove markets quite substantially. As investors, asset managers and financially savvy individuals prepare for the start of the new year, several trends might impact wealth management in 2020.
Your financial stability isn’t just in your hands. Other factors are involved and it’s also largely determined by the variables that surround our economic landscape. Here are just a few things to take note of as the end of a decade marks the beginning of a new one.
Regulatory pressure could play a bigger role
Climate change is slowly but gradually becoming a real cause for concern among the general public. Financial regulators have taken notice as well. Yes, there have been ongoing discussions about how different approaches might pave the way to real solutions. However, 2020 could mark the start of climate change entering the investment regulation arena.
The UK’s Prudential Regulation Authority (PRA) introduced its climate change investment stress test for insurers, while European regulators have stated that they could also be following along with the trend. EU’s sustainability finance package also exists to cover the environmental, social and governance risks and opportunities that could tie in with investment decision-making structures. Regulatory pressure is building up on all sides, which could slowly start to affect how portfolios are built.
A growing focus on marketing to retail investors
Consumers have begun doing their own research in order to validate their advisors’ recommendations, and this could be the key that turns the trend this year. Asset managers are beginning to shift their resources to developing brand awareness campaigns targeted towards end investors. Firms might fine tune their websites and marketing collateral so they are more investor-friendly, with the aim of bringing a more engaging experience to retail investors.
Corporate disclosure is becoming a priority
Environmental-awareness has led to companies being pressured into disclosing more information on climate-related opportunities and risks. The Task Force for Climate-related Financial Disclosures (TCFD) has more organisations supporting them now than in the past. Japan leads the way with the largest number of companies that have agreed to disclose against the framework. As a direct result, the display of our carbon value at risk could hit total global equity earnings, possibly bringing it up to 15% from transition risk (the financial risk from policy, technology, legal or market changes as we shift to a lower-carbon global economy).
The rise of sustainable investing
While we’re on the topic of sustainability, the industry is being redefined as a rising number of investors choose to focus more on the societal impact of their investments. A new generation of investors is taking centre stage, leading to a greater awareness of the responsibility that comes with wealth. In addition, a growing number of high net worth (HNW) women expect the integration of ESG approaches for portfolios. They are also contributing to a new direction that’s helping to bring about innovation, as well as the development of new tools and offerings from asset managers. These are related to seeking out opportunities in sustainable investments.
Alternative investing moves closer to the mainstream – wealth management
A new era can bring new investment approaches with it. Alternative investing is the answer for many that seek out more innovative options away from conventional offerings. There are many examples of the popularity of alternative investing. These include the growing interest in interval funds and non-listed real estate investment trusts (REITs), as well as an estimated increase in efforts for including illiquid assets in long-term savings vehicles (such as Target Date Funds).
Expect smart tech to align with investment strategies
Firms are beginning to take an interest in smart investments, incorporating suitable technology and data spend for a more focused distribution strategy. Asset managers are expected to lean more heavily into the use of machine learning in order to better equip their sales and marketing teams. These intelligence-related initiatives are aimed at generating more data-driven, actionable insights that can allow firms to fine-tune their approaches, and deliver more seamless and integrated customer experiences.
As economies change and marketplaces evolve, wealth management trends indicate the direction that financial strategies may take. Consider these developments as you formulate your plans for 2020 and beyond.
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