10 Defining Themes For The Future Of Wealth Management
A list of new commandments for money management.
A list of new commandments for money management.
J. Pierpont Morgan would be proud that many of the historical tenets of the asset- and wealth-management industry still form the bedrock of how money is managed in modern times. The fund’s 150-year track record is a testament to our industry’s founding principle: While the world may change, clients’ desire for investment expertise and personalised service won’t.
With that in mind, here are 10 key themes that we look forward to helping our clients navigate in the future.
1) Price. Ever since I entered the asset-management industry, sceptics have warned that fee pressure will destroy profitability and detract top talent from the profession. Fees in every industry compress at some point. Successful firms of the future will thrive by either providing commodity-like products at scale for near-zero cost, or delivering hard-to-access insights and exposures that command a premium. Our industry must strive for continuous improvement on both ends of the spectrum.
2) Scale is a matter of survival. With compressed pricing, heavy regulatory controls, and immense spend on data, analytics, and risk-management tools, firms need a relentless focus on operational efficiency, a rigorous control framework, and a disciplined prioritization process around investments for the future. In this context, scale is key. Mergers and acquisitions and outsourcing of sub-scale and noncore capabilities to service providers will enable smaller firms to refocus their efforts back into their most important asset: talent.
3) Actively advising clients. If we learned anything from the Covid-19 crisis, it is the need for sound advice in volatile times. During that time, thousands of actively managed funds outperformed their passive alternatives across asset classes and portfolios. While markets may be efficient, manager selection is key and clients need guidance. The average industry return of a balanced portfolio over the past two decades was 6.4% annually, while the actual experience of the average retail investor was only 2.9%, a stark reminder of how critical hands-on advice is.
4) Impact and purpose. Portfolio managers and research analysts have become essential for investors seeking to make an impact in the world through their assets. Over 80% of surveyed CIOs expressed intent to invest in environmentally and socially conscious companies. Analyzing CEOs and their management teams is no longer just about inquiring about their financial and operational expertise and vision, but also about the impact they make on their communities and the planet. Rising demand for companies that drive positive change will create a virtuous cycle of asset allocation for good.
5) Personalization. Today’s investors want to be intentional, not passive, in investing. They care about taxes and want to overweight companies that can make a difference. They want to avoid whole sectors, or actively own and vote on a company’s strategic plans. Giving clients the freedom to pursue their very specific objectives in a highly customized manner will continue to drive innovation in our industry.
6) Stable and predictable incomes. Millions of investors around the world have come to rely on their investment portfolios as a stable source of income. With individuals enjoying longer life spans and more active lifestyles, especially during retirement years, asset managers need to adapt their strategies to provide for a stable and predictable flow of income every month. Along the same lines, saving needs to start at a young age. Today, less than 40% of Americans have enough savings to pay for an unexpected $1,000 expense in cash. It is our collective responsibility to educate and advise on what is required to cover all of life’s events and milestones.
7) Understanding China. The pandemic has highlighted the interconnectivity of the world and how important China is to supply chains and new innovations. Against this backdrop, it is irresponsible to be a fiduciary of client capital and not have a deep understanding of places like China. It is hard to imagine having a true grasp of competitive global forces without on-the-ground insights of the economies, cultures, and politics of re-emerging global marketplaces. After 100 years of being on the ground in China, J.P. Morgan is poised to become the first foreign asset manager to acquire full ownership of a Chinese fund manager, pending regulatory approval. That kind of commitment will contribute massively to our global research network.
8) Technology drives everything. To adapt to the velocity of progress and change, technology is providing our industry access, speed, and agility like never before. With more technologists than Google and Facebook combined, J.P. Morgan invests over $12 billion annually in technology to help empower our clients and employees to work faster and more seamlessly in ever-changing markets. We need to be forward thinking and have the ability to be a disruptor. Agile, collaborative partnerships between technologists and their businesses will drive innovation and speed to market at an exponential pace.
9) Access. With a global footprint and a full suite of investment vehicles, asset managers must continue to focus on enabling first-time investors to invest in previously inaccessible areas. We are finding ways to provide more opportunities, more choice, and more power to people. Investments once only available to the largest investors in the world are now being accessed by the everyday investor. Democratization of markets should create better outcomes for investors of all sizes.
10) A new flexibility. Our industry adapted quite seamlessly to a previously unimaginable work-from-home scenario. As such, increased flexibility will broaden talent pools and should promote greater diversity. While never losing the apprenticeship nature of our business, we should continue to find new ways of working with one another to generate even greater success.
In coming years, the industry’s winners will remain obsessed about their fiduciary responsibilities. As stewards of capital, the ability to leverage technology and scale to deliver the same extraordinary experience for every investor, with $100 or $100 million, is now within reach.
Reprinted by permission of Barron’s. Copyright 2021 Dow Jones & Company. Inc. All Rights Reserved Worldwide. Original date of publication: May 14, 2021.
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The monthly consumer-price index indicator rose 3.4% in the 12 months to February
SYDNEY—Australia’s monthly inflation indicator came in below expectations in February, signalling that price pressures would likely continue to retreat over coming months.
The monthly consumer-price index indicator rose 3.4% in the 12 months to February, according to the latest data from the Australian Bureau of Statistics. Economists had expected a rise in February of 3.5% on year.
Some economists had expected the monthly CPI update to show a bigger rise, fuelled by services inflation which remains an area of concern for the Reserve Bank of Australia.
The better-than-expected inflation outcome will also help offset some of the uncertainty about the outlook for interest rates that arose in financial markets following news last week of a sharp drop in unemployment in February.
The most significant contributors to the February annual increase were housing costs, which climbed 4.6% on year, while food and nonalcoholic beverages rose 3.6% in the same period.
Alcohol and tobacco prices were up 6.1% and insurance and financial services rose 8.4%, the ABS said Wednesday.
Excluding volatile items from the data, the annual CPI rise in February was 3.9%, down from 4.1% in January.
Annual inflation excluding volatile items has continued to slow over the last 14 months from a high of 7.2% in December 2022, the ABS said.
Rents increased 7.6% for the year to February, up from 7.4% in January, reflecting a tight rental market and low vacancy rates across the country.
New dwelling prices rose 4.9% over the year with builders passing through higher costs for labor and materials. Annual new dwelling price increases have been around the 5% mark the past six months, the data showed.
The 3.6% rise in food prices in the 12 months to February was down from the 4.4% in January. It was the lowest annual growth since January 2022.
Insurance costs jumped 16.5% over the past 12 months to February, with rises in premiums across all insurance types due to higher reinsurance, natural disaster and claim costs, the ABS said.
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Consumers are going to gravitate toward applications powered by the buzzy new technology, analyst Michael Wolf predicts