World Wealth Report 2021 Highlights Booming Wealth Tech Industry and Growing Crypto Adoption
The wealth management sector is undergoing profound changes under the effect of macroeconomic, technological and social changes. High net worth individuals (HNWIs) are increasingly investing in emerging asset classes, changing client profiles and behaviors are creating service gaps, and non-traditional players and wealth technologies are growing in popularity , according to Capgemini’s annual World Wealth Report.
The World Wealth Report 2021, released on June 29, examines megatrends, new drivers of wealth, and the driving role of technology in a rapidly evolving wealth space. He shares the results of surveys with HNWIs and wealth managers to understand investment behavior, client preferences, digital transformation efforts, collaboration strategies, and more.
Crypto, sustainable investment is gaining popularity
New asset classes, including cryptocurrencies and sustainable businesses, are taking off, research shows. Out of 2,900 HNWI in 26 markets surveyed, 72% invested in cryptocurrencies and 74% invested in other digital assets such as website domain names.
Recognizing the need to meet evolving customer needs, several banks and financial institutions have expanded their offering to include digital assets. Goldman Sachs, for example, plans to offer its first investment vehicles for bitcoin and other digital assets to clients in its private wealth management group. Fidelity Investments is preparing to launch its own bitcoin fund as it seeks to strengthen its influence in the digital asset market. And the Wealthfront robotics advisory platform will begin allowing clients to invest in cryptocurrencies later this year, he said in April.
In addition to cryptocurrencies, the demand for sustainable investment is accelerating. A separate Capgemini Research Institute survey of 11,000 consumers found that the proportion of consumers who prefer to invest in assets with positive societal impact but lower returns rose from 31% before the COVID-19 outbreak to 46% in November 2020.
The demand for sustainable investing opportunities is also maturing, with HNWIs now expecting more information on sustainable investing opportunities as well as more personalized solutions. The Capgemini survey found that 43% of ultra-HNWIs and 39% of HNWIs aged 40 or under are likely to request an environmental, social and governance score for the products offered by their company.
Rise of tech wealth
Another key trend outlined in the report is the rise of wealth tech companies. These companies are emerging as both competitors to traditional wealth management companies and enabling partners.
In 2020, wealth tech companies generated solid funding, reaching an annual record of US $ 3.7 billion across 157 deals through November 2020, the report notes. Investments grew by more than 50% from US $ 2.4 billion throughout 2019, a testament to the growing investor appetite for the segment amid the global pandemic.
This is because of the resurgence of consumer interest in robotics advisory platforms, the report says, citing that 34% of HNWIs surveyed actively use a wealth management technology company to manage their assets.
In addition to the rise of tech wealth management specialists, the report notes that non-traditional players are increasingly exploring investment services. In Asia, the fintech branch of the Singaporean carpooling giant Grab acquired the robotics consulting startup Bento to offer wealth management solutions to users, driver-partners and merchant-partners via the Grab application.
At the same time, traditional wealth management companies continue to partner with wealth management technologies to reach new customer segments (32%) and deliver new and unique offerings to clients (29%), according to investigation.
Provide a superior customer experience
As industry boundaries blur and the entry of big tech looms, customer experience becomes the final battleground for wealth management companies. Although steps have been taken to meet the growing demand from HNWIs for personalization and seamless digital interfaces, customers are still generally disappointed with the offerings of traditional players.
51% of HNWIs surveyed said they were not satisfied with their company’s personalized offerings or digital interfaces. Additionally, customers are increasingly looking for support beyond investments, with 36% saying a company’s lack of value-added services could lead them elsewhere.
Despite a general realization that the industry must embrace digital tools and technology, executives still lack so-called “new age skills,” according to the research.
Less than half of executives surveyed said they were confident in their company’s data preparation, and although wealth management firms do relatively well in the broad skills of data governance and building data In a data-driven culture, there are more notable gaps in the implementation of data-driven organizations’ infrastructure and processes.
New avenues of investment
Finally, another trend highlighted in the report is the emergence of new avenues for investment, notably Special Purpose Acquisition Companies (SPAC).
PSPCs debuted in the early 1990s, but their popularity has exploded since 2020. This year alone, around US $ 100 billion has been raised from 370 PSPC listings around the world, according to data provider Refinitiv. Over 400 PSPCs are currently looking for businesses to purchase.
PSPCs have also become the benchmark rating vehicle for financial technology companies. In the first quarter of 2021, 17 blank check companies announced plans to merge with fintech companies, for a combined valuation of US $ 62 billion, according to data from the financial technology investment bank, Financial Technology Partners (FT Partners).
These numbers set a new record for the industry and surpass those of all of 2020 in which 15 PSPCs merged with fintechs for a combined valuation of $ 57 billion.