Sameer Datye explores the underserved segment as part of his 10-part series on wealth management trends.
Financial institutions have served the investor needs successfully in good as well as bad times. This success can be attributed to the fact that the stereotype image of the investor was easy to create, associate with and serve. However, this image is now being challenged - especially so in the past few years. A new breed of investors is making its presence felt- and that too with a bang.
Three of the most prominent underserved segments are: women, millennials and the “covid investors”. These are the segments that seem to be growing and rising. They represent a market opportunity waiting to exploited but which has not been addressed adequately due to systemic and cultural bottlenecks.
According the BCG study (2020), women control 32% of the world’s wealth. From 2016 to 2019, women accumulated wealth at a compound annual growth rate (CAGR) of 6.1%. Over the next four years, that rate will accelerate to 7.2%. Women are adding $5 trillion to the wealth pool globally every year - faster than in past years. The current share of women’s wealth is the highest in North America. However, Women in Asia have the highest growth with a phenomenal 10.4% annually.
Wealth managers will need to find a concrete way to address the blooming yet underserved segment with its own peculiar investment needs:
As the first step, the wealth advisory community could start by acknowledging that this is a specific target market group which must be handled differently. Retrofitting this group into traditional existing groups like ultra-high net worth individuals (UHNI), high net worth individuals (HNI), etc, simply won’t fly.
The pandemic has brought to the fore a new class of retail investor – those who have wholeheartedly entered the wealth markets for various reasons.
Now it remains to be seen that whether these newbies will metamorphose themselves to be long term wealth generators. Undoubtedly, they have now tasted blood and it is an opportunity for wealth managers to open wide, a new market which will sustain even after the pandemic has passed.
The millennials and the post millennials make up for the last big, underserved segment. They hold around 10% of global wealth increasing at an outstanding 16% per annum. The following are some of this segment’s characteristics.
Wealth managers (all - large Financial Institutions, boutique and wealth managers, digital-only advisors) need to meet these highly volatile young investors on their own turf. Understanding their tacit motivations and catering to the resultant needs will be the key to success. The trick will be figure out how to create a relationship that is digitally driven, allows self-service and at the same time the advisory value is explicitly visible for the users.
The advent of the underserved is challenging for sure. Nevertheless it is a harbinger of new market opportunities for financial institutions. The pandemic created a push for the common person to investigate capital markets as an option and thus came about the Covid investors. Maybe, more than diversity trainings, simply having more women advisors might get better results with women investors. Efforts invested in building a hybrid strategy to marry technology innovation with personal touch for advisory will help connect with the millennials & the gen z.
TietoEVRY has been making pioneering efforts to catch latest trends. WealthMapper is a modular digital toolkit that utilises the latest developments in technology and distribution to speed up innovation and time-to-market. This empowers financial institutions to create meaningful conversations with their customer and offer self-service tools to their customers. Feel free to reach out to me for further details.
Sameer is responsible for insurance and wealth solutions. He actively promotes open ecosystem thinking that powers our WealthMapper and Insurance-in-a-Box platforms. At TietoEVRY, he has a long experience of working within the Healthcare, Insurance and Wealth domains. Prior to this, he worked as a product manager and a brand manager in the food, processing and packaging industry. He is passionate about translating technology innovations to business reality leading to better quality of human life.