The global economic slowdown, geopolitical conflicts, the spillover impact of Covid-19 and heightened uncertainty have all shaped the way investment professionals and the financial services industry at large interact with clients.
Individuals have become increasingly concerned about their finances, and as a result, they are rethinking their approach to wealth management. Zimkita Dutywa, Senior Wealth Manager at Standard Bank Wealth and Investment South Africa, has identified a number of key trends that are shaping the wealth management industry.
Redefining the client experience
“No two clients are the same and a ‘one- size-fits-all’ financial approach is not relevant,” says Dutywa. “Client-centricity is redefining the client experience, as wealth managers realize the importance of developing a deeper understanding of each client’s specific needs, circumstances, aspirations and concerns. Leveraging these insights enables them to offer tailored solutions that will help their clients to achieve financial success.”
Adopting a holistic approach
Dutywa points out that there is a new generation of investors, and their expectations around wealth management have shifted. Their lives have become more complex, and the investment environment has grown more uncertain, creating a greater need for holistic advice on and offshore.
“A holistic approach assists with achieving multiple financial objectives through a well-rounded financial plan that considers a person’s values and lifestyle. Typically, this encompasses estate planning, risk management, tax implications and retirement planning,” Dutywa continues.
“For example, an individual might be at the stage in their life when they want to grow their wealth, however they still need to maintain their lifestyle, educate children (possibly abroad), look after aging parents and plan for their own retirement. These goals, which are often conflicting, require a broader financial perspective, and that is why it is important to consistently review your wealth management plan with a qualified financial partner.”
The concept of retirement is undergoing significant changes as individuals respond to social, economic and demographic shifts worldwide. Early retirement trends, coupled with an increased life expectancy due to lifestyle enhancements and healthcare developments, leaves investors with longevity risk which could significantly compromise their cash flow.
“The fact that around 89% of South Africans will not be able to retire comfortably highlights the need for a holistic financial plan that addresses these challenges,” says Dutywa. “It is increasingly important to think of retirement planning beyond just contributing 15% of your earnings to a Pension Fund. Unless you do so, you may realize too late that you don’t have enough.”
“There are various other factors that one also needs to consider, such as inflation risk, rising healthcare expenses, emergency costs, tax implications, diversification to hedge against currency risk and a low economic growth environment. These should be incorporated into your plan, coupled with ideas around supplementing your income pre- and post-retirement.”
New demographic segments are emerging within wealth management, largely driven by the transfer of wealth. The younger generation thinks about advice differently and consumes information mainly using digital platforms. They tend to have a values-aligned investment approach and connect with brands and companies that speak to their social values.
From a geographic perspective, The Africa Wealth Report 2023 reveals that the growth in high-net-worth individuals on the continent is expected to be 42% over the next 10 years.
“We are seeing entrepreneurs, businesspeople, and wealthy families embracing investment migration as a strategy to improve their travel freedom and economic mobility, secure location optionality, and mitigate risk,” Dutywa says. “This highlights the importance of wealth management companies having a global footprint in order to provide clients with an international solution.”
Looking to the future
“The wealth management landscape has evolved over the years and we have had to adapt how we do business,” Dutywa concludes. “Technology remains a key driver of progress, enabling us to take a proactive approach by leveraging data, financial planning tools and trend insights.”
“Just like our clients, the wealth management industry will continue to transform, and we will have to keep pace with emerging trends in order to achieve new growth.”
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