For a long time, too long actually, the Wealth Management industry around the world has been thriving thanks to high returns generated from the twenty-year bond rallies and from the returns of the American equity indices and Emerging Markets. This favorable scenario combined with the poor financial knowledge of customers has allowed us to generate and maintain inefficiencies and high costs in the distribution and management of financial products.
The future of the financial market and the rate at which it is, and has been operating at, is not promising. With bond returns holding a zero or even negative value and the stock market carrying a positive growth rate for nearly a decade, it seems unlikely that the industry will be able to sustain such trends. With returns predicted to be low, it becomes apparent that the industry will not be able to cover the high costs from the inefficiencies.
Additionally, pressures are increased from emerging Fintech companies, such as the Robo Advisors, which are gaining market share specially in the United States. The main critical issues that need to be addressed are listed below:
1) High costs mainly due to outdated and labour intensive operating models;
2) Limited access to multiple investment opportunities, resulting in poor results for the client;
3) Sale of captive products without real competition between asset managers.
