Tech and sustainability in wealth management

Nowadays, the subject of Tech & Sustainability comes up in almost every Investment Fund event, either in a debate or a panel discussion, on the local and international stage, always trying to work out what the future has in store for us.

The Professional Wealth Management Journal (PWM) recently published the results of the 6th Annual Global Asset Tracker survey, taking the views of Chief Information Officers, Heads of Allocation and Client Investment Strategies from 50 global, regional, and domestic financial services organizations that collectively manage over $13.5 trillion in client assets.

In the survey, investors were asked to rank how attractive several long-term investment themes are, and the results were quite impressive.

The top-ranked positions were taken by Technological Disruption, Health Tech, Digital Transformation, Energy Efficiency, Climate Change, Automation & Robotics.

It appears that governance, which is often neglected in favour of more visible environmental and social criteria, is another strong investment theme.

Marrying strong corporate governance and high profitability is an attractive long-term defensive equity strategy and a good alternative to sovereign and corporate bonds, highlights Edmund Shing, CIO of BNP Paribas, Wealth Management.

UBS Global Wealth Management CIO Mark Haefele believes that Sustainability will create some of the highest growth opportunities in the decade ahead.

Companies in the green tech space, ranging from battery electric vehicles to renewable energy, should strongly benefit from government regulation, recovery spending, and investments to propel a transformation from high- to lowcarbon economies.

Stephane Morier, CIO of Lomard Odier Private Bank, suggests the next economic revolution is here, and Sustainability will be a major driver of returns.

For those with the skills to adapt to this new reality, Morier explains, Sustainability will create new sources of Alpha, open up new investment opportunities and lead to enhanced return and reduced portfolio risk.

Now, what does this mean for Asset Management, and what are the requisites for the Asset Manager of the future?

Considering that about 60% of worldwide investments are made from Investment Funds and Institutional Investors, coupled with the fact there are more than 750,000 financial advisors worldwide, Fund & Asset Managers are faced with tremendous challenges.

As Chris McIntyre, CIO of the Boston Consulting Group (BCG), stresses in his presentation, data analytics, combined with other tech tools and advancements, should give the Asset & Fund Manager “bionic capabilities” that will allow them to deliver, along with the financial advisor, personalized and solutions-oriented management; it is like moving from paper maps to GPS.

Wealth Management has changed significantly between 2000 and 2020.

Despite being over 200 years old, it was not until the last 20 years that this industry was shaken to its core by the massive digital and regulatory disruption. The illustration above clearly shows this 20-year transformation.

Trust, creativity, and empathy remain essential characteristics for the Wealth Fund & Asset Manager, while personalization offers efficiency gains and 24/7 availability.

The Manager’s needs are no longer purely motivated by financial objectives. Theyare also driven by a purpose with a positive social impact, operating with transparency, good governance and with ESG at the top of the pyramid.

According to the BCG report on The Future of Wealth Management – A CEO Agenda, to win in the investment arena of the future, wealth management providers and fund managers need to prepare themselves for the changes that will come in the next two decades and improve in the following main areas:

Personalized value propositions

ESG & Impact investing

Client Understanding

Digital & Data

Talent & Culture

Marios Tannousis is Board Member of the Cyprus Investment Funds Association (CIFA)