Affluent European investors, those with between €100,000 and €1m in total assets, have upwards of €23trn in personal wealth. This represents a significant and lucrative opportunity for wealth managers.
As the much-discussed intergenerational wealth transfer gathers pace, a new report from Accenture, with contributions from PIMFA as the trade association for wealth management, highlights the growing opportunities for wealth managers throughout mainland Europe, the UK and Switzerland.
It also addresses the challenges to come from growing consolidation, talent acquisition and the need to appeal to a broader, more diverse marketplace.
This report, ‘Wealth Investments and Advice: Capturing the Next Wave of Growth’, comes hot on the heels of Pimfa’s own research paper by its Under 40 Leadership Committee on how environmental, social and governance (ESG) initiatives can be harnessed to attract more investors from a wider demographic base into the world of savings and investments.
Wealth manager trends
The Accenture report reveals four trends that respondents most expect to reshape wealth management in Europe and influence new business models by 2025. The first of these looks at increased mergers-and-acquisitions activity.
Nine in 10 respondents (91%) expect greater industry consolidation in Europe.
This would be as firms target new business models, wealth segments or geographic markets and, as other financial services firms like asset managers, insurers, fintechs and private equity develop their own wealth offerings or hybrid models.
The report suggests that M&A can help firms add scale as well as new investment services that could appeal to clients eager for broader and more holistic financial planning advice.
Younger advisers
In addressing this, our sector has to deal with an increasing shortage of investment and financial adviser talent and skills. With more financial advisers approaching retirement, seven in 10 executives (70%) believe that a lack of adviser talent and skills could have a significant impact on the industry.
Younger advisers have the skillsets and knowledge that the industry needs, including in areas such as ESG and digital assets.
But they want to work at firms that have dynamic cultures, with values and a corporate purpose that resonate. These professionals may opt to become independent financial advisers if established wealth firms don’t adjust course.
We have all seen how the Covid pandemic heralded a period of massive and sustained growth in the use of technology. But, when asked to assess their own level of maturity in adopting and exploiting digital technologies, firms acknowledged that they need to better design their target digital operations around meeting clients’ expectations at interactions or moments of truth in vital engagements.
Here, the improvements suggested include better onboarding, scaling the provision of advice, understanding clients’ channel preferences, and nudging clients against shortfalls and opportunities. These are key interaction and experience areas that many respondents have yet to address, underlining the need to accelerate and intensify digitisation across the industry
Affluent investor opportunities
The report also highlights a need for greater organisational agility.
More than nine in 10 respondents (92%) think that greater agility will be key to drive future growth, requiring firms to address clients’ significantly increased focus on ESG, improve the client experience through better CRM functions, deploy innovative investment and advice solutions, and realise hybrid advice models to tap into underserved markets.
Accenture estimates that affluent European investors, being those with between €100,000 and €1m in total assets, have upwards of €23trn in personal wealth.
That is approximately 25% more than the estimated €19trn in total investable assets of both the high- and ultra-high-net-worth wealth markets in onshore Europe combined.
If firms can attract onshore investors’ excess cash holdings, which the report estimates to be worth €14trn, then this represents a significant and lucrative opportunity for wealth managers.
As more wealth shifts to younger investors and women, understanding ESG motivations will be critical to attract these groups. In addition, the current market volatility, coupled with the rise in cost-of-living levels in the UK and across Europe, creates an urgent need to deliver advice services to a wider pool of investors to help create a stronger culture of savings and investment.
Liz Field is CEO of the Personal Investment Management & Financial Advice Association
