Over the next year, wealth management firms must take full advantage of three accelerating trends: intergenerational wealth transfer to younger clients whose attitudes to wealth management are evolving fast; the wider adoption of alternative assets; and the transformational power of new technologies including white-label digital wealth management platforms and GenAI. The way firms respond to these key trends will help determine their future success.

The greatest wealth management transfer in history is underway as Asia-Pacific wealth moves across the generations to millennials and Gen Z, women investors become wealthier and take control of their finances,¹ and wealth management caters to the rising number of affluent and mass affluent investors. 

This is happening as client expectations around wealth management are already evolving rapidly in areas such as speed of service, preferred channels of communication, wealth manager digital readiness, and transparency around fees and investment strategies. 

New founders and inheritors of wealth are in the process of deciding what kind of wealth management relationship they want and whether to switch more assets to new wealth management providers – including fintechs.  With clients no longer constrained by yesterday’s wealth management model, the industry is about to enter an extended period of market growth, competition and innovation marked by: 

• The rise of the mass affluent: The mass affluent market for wealth management is taking off, with the number of middle class in Asia rising sharply to 3.5 billion members in 2030 from 2 billion in 2020 – in contrast to the US and Europe where numbers are flatlining.² These investors will need to be served in very different ways to the traditional high-touch HNW market, making full use of new technology platforms and digital channels to offer sophisticated wealth management services at relatively low cost. 
• New investor segments: Younger HNW investors are arriving with different attitudes to investment and a greater demand for easy-to-use digital channels. Understanding these investors and their preferences, and then devising the right solutions for them, will be key. Segmentation approaches are therefore likely to be critical in driving the digital agenda and customer experience going forward. For example, what mix of digital self-service (e.g. execution via mobile) and personal interaction (e.g. advisory via relationship manager) does each segment aspire to? How comfortable do they feel about using artificial intelligence to guide their investing (whether directly or via a relationship manager)? What asset types and strategies excite them?
• Demands for value and transparency: Amid a more challenging economic environment and new and cheaper competitors, clients – including some wealthier clients – are seeking more value. This includes pushing down on fees and charges when they perceive these to be undeserved or misaligned with their financial interests, as well as demands for greater transparency. Meanwhile, investor attitudes that have favored traditional wealth management models are weakening as younger generations show a willingness to adopt the services of fintechs and robo-advisors for some of their wealth management needs.
• Investing with confidence, control and purpose: The new generation of clients are digital natives who are often financially confident and demand more control over their wealth planning and investing, and greater clarity on the reasoning behind investment strategies. They will also demand sensitivity to their life goals and changing world views, e.g. regarding sustainability and thematic investing. The challenge will be to build flexibility and personalization into offerings so that clients can be given the control they want, as well as easy routes to the support they need from someone who understands their long-term financial planning and wider portfolio.

Some things will stay the same – maintaining client trust including on privacy and security remains essential. But wealth managers need to work out how best to characterize the new wealth management segments and their aspirations, and then match these with approaches that marry the right balance of ‘high touch’ with ‘high tech’. 

Getting this right could mean substantial changes to operating models, the implementation of new technologies, rethinking user journeys, and novel ways of working for relationship managers – with all the transformation and change management challenges that implies.

Changes in the macro environment over the last few years have led to sharp changes in investor returns expectations and their appetite for taking risks. Continuing macro uncertainty is driving the need for greater wealth manager nimbleness in terms of the investment strategies that can be offered to clients in different economic environments to match their risk and return aspirations. 

In light of this, wealth managers are realizing that they need a wider asset and product portfolio that is responsive to the evolving marketplace. They are also assessing whether their platforms and operating models are modern and modular enough to deploy updated asset and product portfolios effectively and in a way that is sustainable over time.  

The legacy challenge is the real brake here, rather than the rate of financial innovation. The universe of assets that can be included in investor portfolios continues to expand due to factors such as: 

• Growth & accessibility of private market investments: Investment into private market assets – those unavailable through public exchanges, such as private equity, venture capital, private credit, and private real estate – has grown fast in recent years as investors have sought higher returns in a low-return environment. Once largely the preserve of institutional and ultra high-net-worth investors, many private market assets are now available to a much wider set of investors and their wealth managers as minimum investment ticket sizes shrink towards a few thousand  dollars.
• Digital asset creation and tokenization: Digital assets such as cryptocurrencies – regulatory frameworks across APAC  are cautiously evolving³ – and tokenized assets on blockchains are also continuing to emerge. The related trend of fractionalization, or dividing up ownership of a high-value asset such as a building or an Impressionist painting into multiple smaller portions, is making high-value assets more available and more liquid.
• Sustainable and thematic investing: Many clients have bought into the need for more sustainable investing because of their values and because they hope ESG-linked investments will bring higher returns. Thematic investing is also often a good fit with the long-term perspective of many HNW individuals who want to make returns by addressing the structural, cross-cyclical challenges the world faces.

Wealth managers need to put this expanding asset/strategy universe to work to match the required returns, diversification and liquidity needs of a broadening spectrum of HNW and mass affluent investors. 

However, legacy technology systems and working practices are not making this easy. Legacy systems may only cater to a restricted set of asset classes, limit the processing of fractionalized transactions, and offer cumbersome administrative processes around alternative investments (e.g. regarding frequent capital calls).

There are also often challenges in navigating regulatory hurdles around product/investor suitability, and in building a consistent approach to marrying the online and offline customer interactions necessary to promote investment success in the alternative assets domain. The ongoing expense of adapting and maintaining wealth manager legacy systems is also an increasingly important factor.

The challenge for wealth managers is how best to modernize platforms and processes and more effectively distribute the wider and expanding universe of products alongside relevant advisory services. 

Getting this right means first considering the wealth manager’s strategy and the right asset class/product offering for each target client segment. It may require sophisticated industry benchmarking to identify attractive offerings that differentiate the wealth manager in the marketplace. 

Depending on their ambitions, wealth managers may then need to set out a transformation roadmap including operating model redesign, technology adoption and modernization, monitoring evolving regulatory policies, and client onboarding. The prize is considerable, however, in terms of increasing the range of alternative assets available to clients, improving end-to-end processing and customer service, and creating technology and process flexibilities that can accommodate future market evolution. 

Over the next year and beyond, wealth managers in Asia-Pacific will need to rethink their core technology strategies. Many are still operating cumbersome legacy systems surrounded by manual processes and workarounds that raise costs and limit the omnichannel services wealth managers can offer to clients – and the ways in which firms can support their relationship managers.

Incumbent wealth managers are increasingly aware that they need to compete with fintech competitors to win and retain a new generation of digital- and mobile-oriented clients. That will mean modernizing and rationalizing their approaches to support a seamless front-to-back office workflow and much greater real-time connectivity through:  

• Adopting new digital wealth management platforms that can be used to integrate and automate processes, offer a wider range of seamless digital services to customers, and hook relationship managers up to a range of new digital tools. These tools can be designed to focus the relationship manager’s time where it adds most value for the customer – and most revenue for the wealth manager. 
• Improving data management so that data can be used to drive operational excellence and as a lever for engaging with customers at scale. For example, modernizing data strategies to remove data silos can help wealth managers to build a 360-degree view of the client and generate value-added personalized services, such as delivering timely, tailored investment ideas at scale through app notifications. 

Traditionally, financial institutions looking to renew core technologies had to choose whether to ‘build or buy’. However, some wealth managers are now partnering with other entities, such as large brokers or fintechs, that offer ready-made Wealth-as-a-Service solutions, at times combined with operational capabilities. 

These partners have already developed a modern digital wealth management capability – including the requisite regulatory licenses, operational capabilities – and can offer a ‘white label’ version of this to wealth managers. Cloud-native digital platforms offer key advantages in terms of enabling wealth manager nimbleness, improved data and analytics, and easy scalability. 

The aim of moving to a new platform is to offer clients better services and experiences on a unified, cost-efficient platform with faster in-market deployment to match client expectations (and the pace of competitive offerings). However, modern digital platforms also offer advantages in terms of data management and the environment required to deploy advanced algorithms and artificial intelligence.

Some larger wealth managers and banks are already investing heavily in AI and Generative AI, though most wealth management firms are presently keeping GenAI in something of a ‘sandbox’. So far, it is being used mostly to develop front-office use cases that keep a ‘human in the loop’, such as analyzing data and working out how relationship managers can optimize portfolios, rather than for direct client interaction. 

The pressing need to adopt more unified, end-to-end wealth management platforms and build AI-enabled wealth management is obliging a naturally conservative part of the financial services industry to think hard about how to meet customer expectations. It is time for many wealth managers to reassess how decisions around client segmentation, product strategy, and operating model suitability are aligned with new opportunities to modernize technology, cut costs and drive more growth.