MSCI’s latest Emerging Trends in Wealth Management report reveals four megatrends – transformative technologies, environment and resources, health and healthcare, and society and lifestyle – will be critical influences on the future of investing, bringing their own set of downstream impacts and creating a need for greater personalisation, transparency and technology.
The report, based on a survey of 220 wealth-industry professionals, including investment teams, portfolio managers and financial advisers, reveals that 60 per cent expect their HNW clients will require some degree of personalization – either now or in the near future. Wealth management is evidently at an inflection point as it adapts to the evolving needs and preferences of individual investors.
In the past, personalisation in wealth management was a primarily niche offering, typically reserved for a select group of high-net-worth (HNW) clients. However, MSCI’s research suggests the democratisation of wealth management has transformed personalisation from a luxury to an industry standard, with technological advancements cutting costs and driving efficiency and scalability to provide bespoke portfolios to a much broader client base than ever before:
73 per cent of respondents named personal preferences – such as supporting the transition to net-zero or better corporate governance – as the prime reason wealth clients are seeking more personalized solutions.
58 per cent of respondents believe it is easier to build a new custom model than modify an existing one.
“The demand for personalised portfolios is growing across all client segments, from high-net-worth individuals to emerging affluent investors,” says Alex Kokolis, Global Head of Wealth at MSCI. “A broader set of clients now expect personalization in all aspects of their lives, including financial services, driven by trends in other industries. They want portfolios tailored to their unique goals, values, and preferences.”
As personal preferences gain importance in the composition of wealth portfolios, advisers’ clients are likely to seek assurance that their portfolios are aligned with their values – requiring wealth managers to go beyond the investment information traditionally reported to clients and finding ways to provide greater transparency into what the client’s capital is funding in both public and private markets:
Across all regions, wealth managers anticipate making larger allocations (82 per cent on average) to private assets over the next three years.
However, as interest grows in private markets, advisers (21 per cent) and portfolio managers (40 per cent) view their current solutions for this asset class as insufficient – compared to 59 per cent of investment teams.
Roughly half of all respondents (45 per cent) reported a limited understanding of private assets as the biggest barrier to making higher allocations.
Other notable barriers were the illiquid nature of investments (52 per cent) and the lack of transparency into the asset class (46 per cent) – with fears notably higher among financial advisers (73 per cent and 59 per cent respectively) as they seek to meet client demand for greater assurance and visibility.
“In private assets, wealth management firms may be able to differentiate themselves through their education and learning offerings just as much as their investment offerings – both for advisers and end-clients,” Joseph Wickremasinghe, an executive director at MSCI Research, says. “Beyond that, tools or frameworks to standardise or streamline the due diligence process for private asset investments, or perhaps access to a slate of pre-vetted investment opportunities, may be another solution that end-clients find appealing. Being able to choose specific private investments from a selected range that have been deemed appropriate for the size of their allocation, their broad liquidity needs and investment preferences could increase their level of comfort with this asset class.”
Technology is at the heart of enabling transparency and personalization – but MSCI’s survey results suggests respondents feel many of their current solutions need to be upgraded to allow them to satisfactorily deliver on HNW clients’ expectations.
When asked to rank the areas in which their current technology solutions fall short, advisers conducting manual monitoring of client portfolios came in top at 45 per cent, followed by 42 per cent reporting a lack of dynamic insights on taxes, risk and other elements that impact decision making.
Wealth managers are also eager for a platform that can provide a single interface to manage all assets within all portfolios (39 per cent) and, of equal interest, is to design an appealing client portal (39 per cent).
“The demand for investment transparency has evolved significantly beyond simple monthly position reports, as today’s wealth clients seek deeper understanding of their investments’ alignment with personal values and financial goals,” Dhruv Sharma, an executive director at MSCI Research, says. “Digital platforms can help wealth managers meet this need by aggregating and presenting complex data in meaningful ways – from traditional exposure analysis across geographic and thematic dimensions to detailed insights into private asset classes, such as private credit and private equity. Wealth solutions providers add value by simplifying complex information without sacrificing depth, helping advisers address critical client concerns while providing clear visibility into portfolio exposures.”
