Affluent Investors Demand More Complex Financial Products – InsuranceNewsNet


Mass investors have traditionally opted for general funds or mutual funds for their investments, but there are clear signs that this trend is waning.

In fact, the demand for complex financial products is increasing dramatically, especially among mass investors. This historically overlooked group no longer relies exclusively on exchange-traded funds and mutual funds. Instead, mass investors are beginning to diversify into alternatives, structured products, even artworks and other non-bankable assets, all of which have traditionally been the domain of high net worth and super high net worth investors. .

Here are some of the trends highlighted by recent research from ThoughtLab, Wealth and Asset Management 4.0: How Digital, Social and Regulatory Changes Will Transform the Industry, which examined investment trends. The research compared the preferences of investors at all levels of wealth.

The study found that there is little difference between ultra-high net worth investors and the affluent masses in their desire to increase complex investments. The demand for alternatives (69%), tax-free investments (59%), structured products (26%) and art (16%) among the affluent masses is, in fact, quite similar to that displayed by VHNW investors.

Currently, around 75% of all investors use actively managed funds, with a slight decline expected over the next two years. Interest in passive funds and individual stocks, on the other hand, will continue to grow as investors seek better returns and consider diversifying with alternative investments such as hedge funds and private equity.

All levels of wealth seek to increase alpha through specialized products such as initial public offerings, tax-exempt investments, commodities and derivatives, real estate investment trusts and structured products.

Cryptocurrencies still do not dominate a significant share of the market, as many investors are still concerned about regulatory, market and cybersecurity risks. However, interest in long-term tax-sheltered investment products and pension plans is growing in popularity. This is clearly a sign of an aging population.

This more complex environment poses significant challenges for wealth managers, starting with that of regulation. To deliver sophisticated products to the risk-protected mass market, wealth management firms need to ensure that documentation and processes are well-managed, accurate, and auditable.

All relevant Know Your Customer regulatory profiles, risk adequacy documents and customer confirmations should be completed and filed correctly early on during the onboarding phase and then reviewed periodically.

This places a considerable burden on the wealth manager, who must go to great lengths to avoid documents in poor condition that force applications to be resubmitted to the investor due to errors and omissions. These are the main causes of customer dissatisfaction and possible downstream compliance issues.

Along with this trend to diversify investment products and services, investors are also beginning to diversify wealth management providers. One in three investors have changed wealth managers in the past year, while nearly half of investors globally plan to add more wealth management relationships within the next two years.

This significant new flow of capital will stimulate competition between wealth management companies. They will need to consider the key role a seamless digital experience can play in acquiring and retaining new customers.

A stronger digital experience is also one of the top reasons given by billionaires for switching providers over the past year. As well as seeking to improve investment performance, better wealth advice, access to better personalized service, clearer pricing structures and fees are just some of the other reasons given by investors to transfer assets. Wealth management firms are getting a clear message from investors: focus on their needs or face churn.

The arena of wealth management is thus becoming more competitive and complicated. If you add to this combination of disaggregated service systems and processes, a remote working environment and changing investor expectations, it is clear that systems and processes need to be optimized and automated from the earliest stages of contact. with investors to help lay a solid foundation for a future client relationship. development and growth. In particular, the first impression, the integration step is far too important and complex to be managed manually or with paper tools.

Advisors must have the right tools to orchestrate increasingly complex processes and ensure the tone is positive. According to the ThoughtLab industry outlook, wealth managers must be able to connect disconnected people, data and systems to deliver a seamless customer experience while maximizing front and back office efficiency without sacrificing compliance. Even the smallest inconvenience during this process can lead to lost business or costly and time-consuming compliance issues.

The shift to a seamless digital onboarding system may prove crucial for wealth management firms looking to offer diversified investment products and seize the opportunity that will arise over the next couple of years with the mass market. comfortable. The digital onboarding experience plays a vital role in streamlining processes to make them faster and more compliant.

Not only is collecting the right data the first time essential to providing an easy, intuitive and positive first impression to avoid churn, but it can also help improve efficiency and reduce compliance risk for companies. wealth management companies that are about to evolve rapidly in an increasingly complex environment. and diversified mass market.

Mark Shields is Director of Solutions Marketing at Appway. He can be contacted at [email protected].

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