As technological advancements and changing investor demographics prompt a re-evaluation of investment products and services, PwC has identified a “new breed” of technology-driven players in the market, a trend which is not going unnoticed by global asset managers.
In its latest report, Asset and Wealth Management: Top Ten Trends, the consultancy firm noted the rise of robo-advisers, platforms and digital wealth advisers as being key trends shaping the asset and wealth management landscape over the past year.
“Shifts in investor demographics and technological innovations are prompting a revaluation of how products and services are offered. This evolution has introduced a new breed of technology-driven players, such as digital wealth advisers, platforms and robo-advisers, bringing new value propositions to the market.”
Notably, these new players have also garnered interest from global asset managers as they seek to cater to a new generation of digitally savvy investors.
In September last year, South Korea’s Mirae Asset Global Investments announced a strategic $28 million investment in robo-adviser and fund manager Stockspot, which was expected to help ramp up the provision of low-cost investing advice in Australia and accelerate the firm’s technology and product offerings.
Earlier this year, State Street Global Advisors (SSGA) also made a strategic investment in fintech platform Raiz Invest, acquiring approximately 5 per cent of Raiz’s share capital through a placement.
At the time, SSGA president and CEO, Yie-Hsin Hung, said the move “reinforces our strategy to join forces with wealth firms who share our commitment to help investors globally manage their investments and savings for retirement”.
Just last week, Bell Financial Group became the latest asset manager to wade into this space as it entered into a scheme implementation deed to acquire low-cost trading platform Selfwealth for $0.25 cents per share.
Speaking to Money Management, Peter Brewin, digital assets leader at PwC Hong Kong, which conducted the Asia-Pacific report, observed these technology-driven players can offer lower-cost investment options, thus expanding their investor targets beyond HNWIs.
“This is putting pressure on incumbents to reduce fees in order to remain competitive,” he remarked.
“As well as lower costs, these players offer user-friendly and personalised investment experiences that integrate innovations such as automatic portfolio rebalancing, real-time insights and enhanced data analytics.”
With this, incumbents in wealth management “need to keep up with the pace of innovation” to ensure they remain fit for purpose, Brewin said.
For asset managers eyeing the robo-advice space, he highlighted the benefits of a broader investment range as well as leveraging technological capabilities.
“Industry players need to adopt multi-asset and multi-capability strategies so that they can meet investors’ needs in terms of diversification and customisation. By incorporating robo-advisory, traditional asset managers can provide a wider range of investment options,” he said.
“They can also benefit from the digital capabilities and cost efficiencies of players like robo-advisers. These will grow in importance as data and fund portability increases.”
Wealth transfer
According to the report, the forecast in intergenerational wealth transfer has driven investor demographics to evolve as new technologically savvy investors seek out more digital-first investment experience.
Research from Adviser Ratings suggested 14 per cent of clients are planning to transfer $1 million or more, and 17 per cent intend to transfer $500,000 to $1 million.
Natixis Investment Managers also found 43 per cent of advisers globally feel this represents an existential threat to their business as they are concerned they will struggle to retain assets from heirs. This is leading them to nurture relationships with younger generations, sourcing new clients and offering personalised services.
Brewin agreed this new generation of investors “have different expectations and behaviours” when it comes to how they receive advice.
“For one thing, they are digital natives. They are technologically savvy and demand a digital-first investment experience.
“At the same time, technological advances – such as AI, data analytics and blockchain – have the potential to deliver personalised digital investment products and platforms to a wider range of investor segments,” he said.
Looking ahead, he forecast investor expectations will continue to drive demand for technology-driven wealth management solutions. Innovation in the industry will also be driven by financial inclusion and empowerment, fee reform and transparency, as well as “retailisation” where traditional insto funds are offered to retail investors.
“Firms will be pushed to develop tailored offerings that better deliver value for money.
Consolidation in the industry is also set to accelerate as industry players seek to add capabilities and to grow with new asset classes and investor segments,” he told Money Management.
