Signals of change

Growing competition in wealth management comes from non-traditional players and neo banks operating exclusively online, and fintech firms and tech giants entering the market. However, profit margins are suffering as COVID-19 creates a perfect storm fueled by recession, weakened consumer confidence, unemployment, rising debt and low growth. 

Technology continues to revolutionize traditional customer relationships, while regulators are becoming increasingly interventionist to enhance competition, help improve cybersecurity, protect data and aim to ensure enterprise resilience.

These trends are causing convergence in a fragmented market.

In Europe, a greater focus on mass-market customers

In the UK and continental Europe — with the exception of Switzerland — domestic players are increasingly mass-market financial well-being providers or domestic wealth managers, and sometimes a combination of the two. The UK market is especially attractive, as evidenced by high M&A activity, particularly for domestic wealth managers.

We anticipate greater integration between investment and banking, as banks control the greatest wealth management market share and now face a low-interest environment combined with excess cash accumulated during the pandemic.

Within the financial well-being and domestic wealth management space, there is a move towards hybrid services to offer remote, global investment advice to the mass-market. This calls for a combination of human and digital capabilities, more women advisors, plus increased automation and self-serve portals.

Asset managers are pursuing varied relationships with investors — some more direct, others via intermediaries. Some wealth-management organizations are forming innovative cross-industry ecosystems and partnerships, particularly in the financial well-being market. The growth of open data and open finance is increasing regulatory requirements, while in markets like the UK, regulators are focusing on operational resilience and governance. 

Forces of change continue in the Middle East

The sector has traditionally been dominated by international wealth managers, forging deep, face-to-face customer relationships. 

In recent years, however, there has been an influx of locally based wealth managers, digitally engaging with well-informed customers looking for differentiated products to help improve their portfolios. While clients still seek investments that generate significant returns via tech stocks, SPACs and private equity, they are also embracing ETFs and funds, particularly in Islamic finance. Indeed, the Islamic wealth-management sector is set to capture market share among younger, digitally-savvy investors.

In response to growing economic volatility, clients are increasingly turning to professional asset managers to help improve returns and manage risk more effectively. They are combining regional portfolios with international assets for greater safety, while also focusing on next-generation succession planning.

The Middle East wealth management industry should embrace these changes to cope with intensifying competition, adopt modern digital capabilities, and satisfy increasingly informed customers in this growing sector. 

Innovative alliances emerging in Africa

Wealth managers across the African continent are pursuing digital capabilities to enhance customer service, help improve cost-efficiency and competitiveness, while delivering new products and services to the region’s underserved markets. Fee models are also under scrutiny.

In South Africa, firms are forming innovative partnerships and alliances with digital innovators, to enhance distribution channels and rapidly broaden reach.

In 2021, a leading insurance and wealth management group joined forces with a mobile telephone company to launch a digital insurance and investment business, to market a comprehensive range of financial products to customers across Africa.

In another recent initiative, a large South African bank announced plans to open bank branches within a retailer’s stores, increasing convenience for the bank’s customers while offering an array of products and services to retail customers.

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Further Insights