2024 Predictions for Wealth Management and Investment Trends
Reflecting on Past Predictions and Forecasting 2024
As we venture into 2024, it’s both enlightening and crucial to reflect on the predictions made for the wealth management sector in early 2023. These forecasts not only shed light on past foresight but also serve as a compass to navigate the unfolding realities shaping the industry today.
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Forecasting the Future by Reflecting on 2023 Predictions
I start with a reflection of each paragraph focusing on my predictions for wealth management for 2023:
- The Rise of Alternative Asset Classes and Private Markets: Though slowed, the dominance of alternative assets and private markets persists as a pivotal forecast shaping today’s landscape. The expanding diversification of investment portfolios solidifies the projected move toward pursuing yield and opportunities beyond traditional asset classes.
- AI-powered mass-personalisation: The rise of AI-powered investment strategies fuels excitement. But a comprehensive AI-centric wealth platform faces regulatory uncertainties and significant impacts on the current work environment, hindering broad adoption and impeding progress for start-ups and traditional finance. This uncertainty encompasses business and operating model changes, profoundly altering work-life balance. Job displacement, particularly among creatively inclined workers, poses a significant challenge without feasible alternatives in sight.
- ESG investing faces hurdles like ‘greenwashing,’ diluting its impact. The prevailing ESG hype persists, yet asset managers such as Vanguard remain skeptical, citing concerns about inconsistent metrics and the delicate balance between returns and climate-focused equity selection. Clearer standards and investor education are urgent to strengthen ESG credibility and align investments with genuine sustainability goals. Another factor in this contentious topic is the ambitious pursuit of renewable power, heavily reliant on a globalised world with intact supply chains for crucial materials like rare earth metals and silicon.
- Tokenization of Real-World Assets: The anticipated digitalisation of real-world assets has become the focal point of innovation and transformation for many traditional financial institutions and tech start-ups alike. This shift promises to transform how assets are managed and accessed, offering greater accessibility and efficiency for investors worldwide, particularly for illiquid assets, e.g. real estate.
- Customer-centricity and digitalisation of wealth management: The emergence of digital private banking and neo-private banks exemplifies the realisation of this prediction, catering to evolving client preferences and offering tailored, tech-driven services. Neo-banks started to significantly bite into the cake of the big players.
- Outsourcing and Wealth-as-a-Service (WaaS): The prediction surrounding Wealth-as-a-Service and the outsourcing paradigm has become accepted but transition from conjecture to reality is slow. Wealth managers actively embracing this model realise the efficiency and scalability provided by outsourcing certain aspects of wealth management services.
- Technology’s Role in Wealth Management Transformation: The prophecy delineating technology’s pivotal role in driving wealth management’s transformation remains an undeniable truth. The integration of cutting-edge technological advancements, including AI, blockchain, and data analytics, underscores the predicted paradigm shift in the industry’s operational landscape.
The evolution from past predictions emphasises the necessity for wealth managers to adapt continuously and embrace technology to future-proof their practices. While some have progressed, many remain stuck in traditional models. This synthesis of predictive insights and present realities empowers a more responsive approach, guiding the wealth management sector into an impending dynamic future.
2024 Predictions Shaping Wealth Management and Investment Trends
The year 2024 is all about a dynamic future: the motto is “Adaptation and Empowerment”, but let’s take a look at the predictions for the trends in wealth management and investment that will shape the year and the future.
Global Geopolitical Shifts: Divergence of the Global South
Geopolitically, 2024 will witness a marked divergence of the Global South from the Western world, impacting investment flows and strategies. Economic and geopolitical dynamics will increasingly reflect this shift, influencing investors to reassess traditional Western-centric investment models in favour of alternative, more diversified approaches, i.e. a shift to investments into the Global South. Geopolitical escalations can compound challenges within supply chains for commodities and raw materials, adding complexity to investment strategies in this evolving landscape.
Resurgence in Traditional Finance and Alternative Investments
Amidst a resurgence in traditional finance, fixed income and resilient US stock markets will regain prominence, appealing to investors in pursuit of stability and reliable returns. Simultaneously, alternative investments like private equity, cryptocurrencies, and digital assets will endure, offering growth and diversification opportunities.
However, there’s a caveat: if inflation persists, investors may prioritise wealth protection through real assets, wary of the risks associated with long-duration bonds in fixed income.
Integration of crypto assets and especially Bitcoin in financial advice
With the approval of Spot ETFs investing in Bitcoin and cryptocurrencies and/or altcoins the mainstream adoption will boost investor demand and require traditional financial institutions to provide advice on the most likely “exploding” asset class.
Digital Assets continue to proliferate ‒ Tokenisation’s Strategic Ascendancy
As tokenization gains traction, it will transform how assets are issued, traded, managed, and diversified. Tokenisation serves as a pivotal force reshaping modern finance due to its profound implications ‒ essentially, it signifies the potential tokenisation of “everything.”
This paradigm shift envisions the tokenisation of assets present on the balance sheets of individuals, organisations, and even entire nations. The breadth of tokenisation spans across financial assets, tangible assets, and intangible assets, categorizations that have persisted for centuries. Notably, assets existing in native digital form stand at the forefront of easy tokenisation, encompassing financial assets and numerous intangible assets.
Evolving Investor Mindsets: Taking Charge Amidst Disillusionment
In 2024, a profound shift is reshaping the investor landscape, as traditional financial institutions face mounting disillusionment. Investors express a tangible disconnect and eroding trust in conventional banks and wealth advisors resulting in a notable shift in attitudes.
Investors are pursuing greater control and exploring diverse avenues. They’re becoming more price-sensitive, transitioning from passive to active strategies seeking second opinions and reviewing investments.
This heightened vigilance reflects an evolving mindset among ultra and high net worth individuals, family offices, and affluent investors, emphasising autonomy and active engagement in shaping future investment strategies. This shift will affect not only strategies but also lead to the emergence of alternative financial service providers, incl. non-banks, and possibly even towards DeFi concepts.
Recognising Tribalism in Investing and the Imperative of Diversification
Aligned with the evolving mindset of investors, ‘tribalism’ is emerging as a prevailing trend in investment choices, highlighting the dominance of individual convictions in decision-making. Yet, the significance of diversification remains paramount. Investors are recognising the importance of agility, optionality, and aligning actions with long-term visions, anchoring decisions on a well-thought-out roadmap.
Corporate Financial Wellbeing as a Focal Point
Corporate Financial Wellbeing, a growing focus area, will take centre stage in workplace strategies. Recognizing the intrinsic link between financial wellbeing and productivity, companies will prioritise employee financial wellness initiatives to enhance workplace productivity and overall organisational success.
Persistence of Independent Financial Guidance
The evolving investor mindsets and expanding investment products fuel the growing demand for independent financial advice. Investors seek personalised, unbiased guidance beyond traditional banking institutions, emphasising tailored advisory services to align decisions with unique financial goals.
This trend highlights the importance of genuine customer focus for both traditional and emerging players. Hybrid service models could flourish, evolving from existing transactional platforms. Transitioning from product-centric to customer-centric advisory approaches is vital.
Success depends on user experience design, empowering advisors and enabling self-service holistic advice platforms. These platforms cater to a wider clientele by incorporating self-service tools, designed alongside investment platforms for managers.
A fundamental paradigm shift enables the implementation of service fees based on delivered quality and time for holistic financial offerings like advice, mentoring, and coaching, reflecting personalised services for clients.
The Evolution of WealthTech Apps
WealthTech applications are poised for further evolution in 2024, reshaping financial planning, literacy, and overall well being. These apps will redefine the client-advisor relationship, empowering individuals with user-centric interfaces that facilitate comprehensive financial management. The emphasis on holistic financial planning and literacy will drive the development of intuitive, user-friendly platforms, offering personalised insights and strategies to enhance overall financial wellbeing.
Conclusion
The predictions for 2024 underscore a landscape defined by complex interactions among geopolitical shifts, investor mindsets, technological advancements, and strategic changes in wealth management practices. This sets the stage for a dynamic and transformative year in the industry.
It’s the responsibility of each individual involved in the sphere of wealth, investment, and associated technology – including investors, financial service providers, investment managers, startup entrepreneurs, WealthTech professionals, and independent experts – to reflect on their specific context and environment, defining a suitable path forward in 2024.
Sources and references:
- Predictions for the Wealth Management Sector in 2023, Urs Bolt: https://morethandigital.info/en/predictions-for-the-wealth-management-sector-2023/
- Ralf Kubli, LinkedIn, 2023: https://www.linkedin.com/posts/ralf-kubli-644393_tokenization-rwa-activity-7141777776080056320-aOYN/
- Financial Wellbeing and Workplace Productivity, Olga Miler, LinkedIn, 2023: https://www.linkedin.com/posts/olga-miler_financialwellbeing-workplaceproductivity-activity-7140405893631750145-k4l_
- The Future of Wealth Management in the Philippines, Urs Bolt, 2023: https://morethandigital.info/en/prosperity-future-wealth-management-in-philippines/
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