The wealth management industry, which combines asset management with financial planning and advice, is expected to swell 67 per cent from US$137-trillion under management in 2021 to almost US$230-trillion globally by 2030, according to Bain.ANDREW KELLY/Reuters
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Asset managers and brokerages are rushing into wealth management as “the rich get richer” and a rising tide of young do-it-yourself (DIY) investors come into inheritances, according to a new report.
Growth of wealth management is set to outpace that of asset management by an average of 2 per cent every year until 2030 as DIY investors seek assistance in turbulent markets, according to research from Bain and Co., a consulting group.
The move into wealth management is a marked shift for traditional asset managers. The industry historically relied on self-directed brokerages such as Charles Schwab Corp., Fidelity Investments Inc. and Hargreaves Lansdown PLC, or independent wealth managers to steer investors toward their products.
The aim is to attract younger customers coming into new wealth and keep them as their needs grow more complex.
DIY investors joined markets in record numbers over the past few years. Now, “we’re betting that those self-directed investors will seek advice,” says Stephen Bird, chief executive officer of old school asset manager Abrdn PLC.
At the end of 2021, Abrdn bought the U.K.’s second-largest DIY investment firm, Interactive Investor, to grab a younger, more tech-savvy customer base.
“When the next generation inherits money from their parents, they typically don’t stay with their parents’ financial advisor,” Mr. Bird says.
The wealth management industry, which combines asset management with financial planning and advice, is expected to swell by 67 per cent from US$137-trillion in assets under management (AUM) in 2021 to almost US$230-trillion globally by 2030, according to Bain.
Asset management, which is more investment focused and already a saturated market, is expected to grow by less than 40 per cent from US$109-trillion to US$152-trillion in AUM over the same period.
“If you have a wealth management capability you have a much more valuable business,” says John Waldron, chief operating officer of Goldman Sachs Group Inc., of the future growth in the sector. Younger customers are “incredibly attractive to us,” he adds.
Self-directed investors face a down market, many for the first time.
“The rougher things get, the more people will need wealth management,” says Markus Habbel, a partner at Bain who worked on the report.
Much of the growth in demand for wealth management is because of rising inequality and highly concentrated wealth, Bain found. Globally, the investible assets of wealthy individuals is expected to double in almost every part of the world by 2030.
“The rich are getting richer, that’s for sure,” Mr. Habbel says.
Across the industry, wealth management services are picking up steam.
In June, Charles Schwab, one of the largest U.S, retail asset managers, renamed its 20-year-old private client advisory to Schwab Wealth Advisory to widen the appeal of its wealth management offering to a broader client base. The average customer enrolled in the program has US$2-million in investible assets.
“We’d like them to take advantage of all the services we offer and be clients for life,” says Bryan Olson, the head of Schwab’s wealth advisory business.
“Hopefully the next generation will be clients too, and when that wealth transfer takes place we will already be engaged and helping them.”
Many, such as Abrdn, are building out their offerings through acquisition.
In March, Royal Bank of Canada announced plans to buy one of the U.K.’s largest wealth managers, Brewin Dolphin PLC, for £1.6-billion to become a dominant player in the U.K. wealth market almost a year after JPMorgan Chase & Co. bought online wealth management platform Nutmeg Savings and Investment Ltd. for US$1-billion.
Goldman’s Mr. Waldron says the group was actively looking for businesses that expanded its wealth management business’ digital capabilities.
Mr. Habbel, of Bain, says: “We expect a lot of M&A.”
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