Three key areas of focus for the wealth management industry in 2021

Charlotte Ransom, 14/01/2021

By Charlotte Ransom, chief executive of Netwealth

Following almost 12 months of disruption and unprecedented change, the new year signals a clear time to pause, reflect and take stock of lessons learned.

In 2020, the Covid-19 crisis saw the acceleration of trends already taking shape across the wealth management industry, further highlighting their importance for both providers and consumers.

Such trends include the heightened need for better consumer education, the desire for improved digital capabilities from providers, and the assurance of value for money for consumers – all of which are key to ensuring client satisfaction, renewed stability and better financial resilience for all in 2021.

Charlotte Ransom, the chief executive of Netwealth

Education equals empowerment 

The continued demystification of effective financial planning through education will be critical in enabling consumer empowerment, helping to further the reputation of the industry in 2021 and beyond. To achieve this, it is important that greater access to obligation-free financial guidance is championed.

Technological advancements have helped service providers offer ways for consumers to assess their goals and explore the associated investment risk needed to help achieve them. However, more needs to be done to broaden the prevalence of these tools to help empower and educate financial consumers.

Regulatory support and guidance for firms may be necessary to address any perceived risks for providers and would help accelerate the introduction of these lower touch services. This would, in turn, help retail consumers to make appropriate investment decisions without the need to take on full blown, paid for advice unless and until it is needed.

Done well, sentiment towards the industry will be further improved through helping address the current information asymmetry between providers and consumers.

Digital capabilities are imperative

It goes without saying that firms with insufficient digital capabilities have struggled this past year. Although significant developments, such as the roll-out of multiple coronavirus vaccines, have triggered a tentative look towards a post-pandemic world, technology will remain a central part of all good service provision.

For example, the addition of virtual meetings as well as in-person interactions will undoubtedly continue, marking a fundamental long-term shift in the relationship between financial consumers and their wealth managers.

Beyond virtual meetings and the ability to carry out basic functions online, I would like to see far greater provision of digital sophistication from the industry over the next 12 months. This includes the development of improved tools for portfolio interrogation and the management of financial goals for end clients.

In a hybrid world, investors still desire the expertise and guidance of an adviser. However, this should be provided in conjunction with accessible, modern technology. According to our research, 70 percent of investors would like to be able to track their portfolio performance fully online in the future, while 63 percent highlighted the need to be able to manage their investments virtually going forward. 

These findings clearly emphasise a shift in investor preferences. It is vital that further technological adoption takes place to complement the role of wealth managers and to guarantee the needs of consumers are being met.

Crucially, wealth management providers must ensure they are not left behind by other areas of the financial services industry when it comes to technological advancements.

Value for money 

During a year that has been heavily marked by economic turmoil and financial struggles for many, we believe that now, more than ever, clients will be examining and evaluating whether their wealth manager is providing them with value for money.

Our research recently found that following the first national lockdown, over a third of investors were considering switching their wealth manager, with over half (56 percent) stating that this was due to the high fees their adviser charged.

Another contributing factor behind switching was dissatisfaction with investment returns, with 47 percent citing this as the reason they would leave their provider.

With returns under pressure over the last year, and future returns potentially even harder to come by given current levels across equity and bond markets, investors are more attuned than ever to the impact that high fees have on their long-term net returns.

If providers can drive greater operational and service efficiencies, they should be able to lower all-in fees without having to compromise on service – this is what will drive value for money for the end consumer.

While 2020 was a year of unexpected and unprecedented change, the outlook for 2021 also remains uncertain. However, what remains clear, irrespective of the wider macroeconomic and political climate is this: the groundswell of change is underway in wealth management and the industry will need to embrace these developments to cement its long term relationship with financial consumers.

Ms Ransom launched Netwealth in May 2016. Having started her career at JPMorgan, she spent 20 years at Goldman Sachs, serving as a partner for 10 years. From 2012, she explored the impact of digital technologies on a variety of industries before founding Netwealth in early 2015.

Ms Ransom is a vice president of Save the Children and a recipient of the 2015 Mary Lou Carrington Award for her work with Speakers for Schools. She is an active donor and supporter of overseas educational projects, including literacy in Bhutan and early childhood care and school-building in Uganda and Rwanda. She was recognised by PAM Insight as one of the 50 Most Influential in both 2019 and 2020.