The first week of the New Year is almost complete. The Christmas decorations are down, the mornings are dark and cold, and January is certainly in full swing. Despite our best intentions and well-meaning resolutions, old habits find themselves slipping into our daily work habits.
So, will it be “New Year, new me” for the private wealth sector, or will the industry still be plagued by the same headaches as in previous years?
Despite being an optimist, I can’t see certain headaches being appeased just yet.
The issue of ESG and sustainability is one of those. Whether or not it can be described as a headache is debatable, however it is certainly a large problem that needs collective action to solve.
While more and more firms are talking about ESG and the importance of promoting sustainable practices, the industry is still clouded by accusations of greenwashing and confusion over definitions. As the situation becomes more urgent, this conversation will be even more important for firms.
The regulators are catching up too.
Rules to improve climate-related financial disclosure asset owners, managers and corporate issuers were finalised in December by the Financial Conduct Authority.
The rules were effective from 1 January for the largest asset owners and managers, and will come into force in 2023 for other firms. Firms with less than £5 billion in assets are exempt, however they may choose to adopt similar practices as it is likely clients may start to demand it.
Climate-related regulation is just part of an increasing regulatory burden wealth managers are facing. This, combined with growing compliance costs, is often cited as a key reason for the influx of M&A activity the wealth market is experiencing.
Meanwhile, just before Christmas there was a flurry of significant fines facing major banking institutions. While these were all retrospective, the potential cost burden on firms cannot be ignored. It also seems unlikely the fines will be limited to the likes of NatWest, UBS and HSBC.
In fact, FCA fines are at their highest rates since 2015, rising to £577 million last year.
Finally recruitment remains a challenge for wealth managers.
It is still very much an employees’ market, making it harder for firms to recruit and hold onto top talent. thewealthnet is receiving more press releases and tip offs relating to job moves on a daily basis than it has for a very long time.
While it seems unlikely this frenzy of activity can keep apace indefinitely, it does not show signs of abating just yet.
At the same time firms are coming under increasing pressure to demonstrate their commitment to diversity and inclusion. Recruiting, particularly for senior roles, within a relatively limited talent pool can make this challenging.
Developing and nurturing diverse talent will remain a key challenge throughout 2022 and those firms that manage to do so successfully will almost certainly begin to reap the rewards.
