The New World of Wealth: Top Predictions for 2024
Updated: May 20
It's time to discuss how shifts in economic, social and consumer behaviour affect the wealth services you provide, especially the increased need to operate digitally overall.
According to McKinsey, wealth companies are accelerating digitisation as a key strategic importance. They estimate that 42 million households, representing $66 billion in annual revenues, are prime candidates for virtual wealth advice. This heightened role of digital is impacting financial service models, and it promotes a shift toward innovative new ways to interact with clients and deliver wealth products and services. Especially in solving the age-old conundrum of accessible and affordable financial advice for everyday people.
The economic growth of an industry is usually driven by the triangulation of regulatory changes, consumer demand, and technological advancements. This occurrence is happening within our industry and it has the propensity to drive significant growth and opportunities for wealth businesses.
Here are three factors evolving the financial services industry in 2024
Regulatory changes: Regulatory changes are set to enable some tailwinds, resulting in digital service models advancing. This will require some redefining of traditional value propositions and operating processes within wealth businesses.
Consumer demand: Demand for wealth services, especially financial advice, is at an all-time high. Investment Trends reported that 12m Australians have unmet financial advice needs – with 38% stating they would turn to digital advice tools for seeking advice. In the UK, more than 53% of adults say they have financial problems and need to seek financial advice. That is a staggering need for financial advice services.
Technological advancements: Consumers encounter tech innovation in almost every interaction they experience. Generative AI is also revolutionising how work is carried out within businesses – from AI chatbots to creating content. Smartphone “life apps” also play an integral role in how we bank, shop, and socialise. This widespread behavioural shift emphasises that both the wealth process and client experience needs to progress towards more digital means and move away from the likes of static data and paper.
My top trend predictions for FY 2024
Financial services will be required to make significant investment into modernised fintech services, leveraging digital platforms and advancements in AI.
Key themes wealth businesses should pay attention to over the next financial year:
Artificial Intelligence AI AI is moving so fast that wealth businesses cannot afford to take a “wait and see” approach. There is a need to start identifying suitable use cases that can deliver tangible outcomes through the use of trusted AI solutions. Establishing the right AI infrastructure (albeit third-party or in-house models), that are efficient, scalable, and manages the right governance, will help to ensure your AI strategy is future-proofed. With various models of enterprise AI that can be applied, such as: Multimodal Generative AI, API-driven AI, Open Source AI and customised AI, these solutions require careful due diligence in the suitability of both the "use case/s" and the "business case". Having a robust AI strategy is paramount.
Client experience is a competitive battlefield
Consumers prefer to engage with wealth services that provide a customer experience that combines a hybrid of digital (self-service first) and human (backup) - the “self-service” but also “do it with me” models.
This has been identified throughout various wealth models across the globe - from purchasing investment products, to share trading, to managing retirement savings. There is significant demand from consumers to want to vary between digital and human – depending on where they get to in a particular digital journey or the complexity of their needs. Delivering upon a hybrid customer experience and understanding your client's behaviours better, will put your wealth business in good stead against the competition.
Regulatory change As we operate in an industry with ever-changing regulatory conditions, there’s a heightened focus on leveraging digital & AI technologies. In Australia, Treasury & Parliamentary Council are drafting new legislation as an outcome of the consultation on Michelle Levy’s Quality Advice Review (QAR). In the UK, changes have been proposed and implemented as an outcome of the Retirement Income Thematic Review by the FCA. Financial service businesses, especially those dealing with retirement income, longevity risk, and tax efficiency advice, need to leverage digital and AI technologies to ensure efficiency and scalability are achieved within their service models. There is a greater obligation to respond more dynamically to the current demands of regulatory fluidity.
A heightened focus on cyber security
Threats on financial institutions are only increasing, with cyber risk too great to ignore. Businesses will need to drive a greater focus on cyber security measures, and staying on the front foot in this space will be crucial.
There is an expectation on financial institutions to protect consumer data and privacy across their products and services, with regulators imposing an integrated cyber risk strategy to further enhance their safeguard.
Cyber security threats on financial institutions are increasing - according to VMware, there’s been a 238% increase in cyberattacks on financial institutions. This saw an average cost of $5.72 million per data breach.
As the cyber security space is constantly shifting, knowledge is power when it comes to protecting your business from security breaches.
There is no better time than now to boost your digital strategy to stay competitive and increase the value of your wealth value proposition.
If you want to leverage Jacqui’s consulting services in the areas of WealthTech & AdviceTech, DM to book a time to chat.
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