It’s that time of the year when economists, asset and wealth managers indulge in a heavy dose of crystal ball gazing to foretell what the next year may bring. We are no exceptions and have attempted to outline our predictions on 5 key Wealth Management trends for 2024. So here goes!
Trend #1: The Wealth Management Industry will be more Diverse & Inclusive
The popular perception of the wealth management industry is dominated by a stereotypical demographic. Whether in MF, AUM, PMS mobilizations, AIF commitments, etc., the client profile that typically comes to mind is that of a successful entrepreneur or a middle-aged salaried / working professional who is predominantly male.
According to data gathered on women investors a few years back by Kuvera, an online Wealth Management platform, out of every 5 investors in India, just 1 was a woman. However, this underserved investor demographic presents an opportunity for those who strive to understand and cater to their needs.
Asset and Wealth Managers that imbibe the diversity, equity and inclusion (D&I) agenda not just in fair hiring and compensation practices but also in reimagining offerings that could appeal to women and LGBTQ+ would see their fans, followers, and investors grow manifold!
Trend #2: Access to Wealth insights will be more democratic
The Covid-19 induced lockdown brought forth a rush of millions of eager first-time investors from diverse ranks like college students, homemakers, gig workers, etc., with a smartphone in their hand and dreams in their eyes to harness the power of India’s growing stock markets. Their numbers can no longer be ignored, as evidenced by ~12.7 Cr. demat accounts in the country and INR 17,610 Crs. of monthly MF SIP contributions.
While wealth managers prefer to concentrate on the top of the pyramid (HNI / UHNI), the numbers of hitherto overlooked populace of investors are an opportunity that wealth managers can ignore at their own risk. While the ‘unicorns’ (viz HNI / UHNIs) are used to wealth managers jostling for their attention, it’s the ‘soon-i-corns’ that are under the radar and would generate the real growth wealth managers seek as the former grow and evolve into the mythical one-horned creature.
Wealth managers will have to optimize their unit economics through technology and out-of-the-box thinking to figure ways to serve these investors in a sustainable manner.
Trend #3: Divide and Conquer – Wealth Management is becoming fractional
When the minimum ticket size for an MF investment was reduced to INR 1,000 by an AMC many years ago (v/s 5K standard prevalent at that time), it was hailed as a revolutionary move to make investments in the market more accessible. Today, fintech-promoted MFs have brought this down further to as low as the price of a small bar of chocolate viz Rs. 10/-
There is no reason that what can be achieved in the MF world cannot be replicated through other investment products to make them more widely owned. Market watchers have observed that it’s the widely dispersed ownership that generates stability and liquidity in markets, as investors with different return expectations and time horizons balance each other out. We hope 2024 will usher in an era where fractional investments permeate many asset classes and products such as in leased commercial real estate, vacation homes, start-up investments, venture capital, vintage cars and wines, yachts, and many more!
Trend #4: Wealth Managers will cater to both – financial and physical asset investors
2023 so far has been a dream run for many equity market investors, some of whom have reaped exceptional rewards in the mid and small-cap space. For instance, the YTD 15 Dec’23 returns of large cap, mid cap and small cap (proxied by the Nifty 50, Nifty Midcap 100 and Nifty Smallcap 250) have been +19%, +42%, and +46% respectively. Additionally, 2023 has produced 9 multi-bagger IPOs generating moolah for their investors.
Eventually, stock market booms lead to real estate booms as investors look to encash their profits and reinvest in residential and commercial real estate for their own use as well as for investments. Wealth managers will need to tie up with real estate consultants, property managers, and builders to serve these client needs.
Trend #5: Wealth Management will become more ‘Phygital’
While we have witnessed the transition of Wealth Management players from the Physical to the Digital domain, the asset and wealth managers of the future will realize quickly that reaching digital saturation levels is a very real threat to future growth.
Ultimately, clients whose investments experience the inevitable roller coaster would seek a ‘real person / Wealth Management professional’ (v/s AI chatbots) for handholding and addressing their concerns. This will ensure they stick to their asset allocation and avoid overreacting to the ‘noise’ which emanates when things don’t go as planned.
(The author works as the Head - Products & Advisory at Merisis Wealth Pvt. Ltd.)
