Peter M. Brady’s Post

Transcript

There is an $85 trillion wealth market on the table. How can asset managers tap into that? And what's the role of technology and fintech? Hello, and a warm welcome to Financial Services Fast 5. Today we're going to be talking all about asset and wealth management. And I'm very thrilled to be joined today by Daniella Cohen, who's one of our RSM's industry experts in this space. So a very warm welcome to you, Daniela. Thanks, Peter, and excited to be here today. It is fantastic to have you on this program. So we're going to get stuck into five questions as usual. And the first question, Daniela, is what do you see in this space? What are the major trends in the next three to five years? The next three to five years, we can expect to see asset managers across the board transforming their organizations as a whole in order to tap into the $85 trillion wealth market. We'll be seeing changes from their investing strategies to their target capital sources to the organizations that they're partnering with. There's really two main forces driving this future state. One of them, retail investors, account for half of all wealth globally, and they're demanding alternative investments more and more as they look for new diversification options outside of the public markets. And two, the baby boomer generation primarily prefers investing their wealth in stocks and bonds, but younger investors are constantly keep seeking to expand their investing toolkit by optimizing their portfolios with increased allocations to private markets. So in order to keep up with these two forces, asset managers will have to expand their product offerings to attract capital from these new non traditional sources such as individual retail capital that we're just discussing. Along with that product diversification, we're also expecting more partnerships between asset managers. And the and organizations such as family offices and wealth management firms. And it's not easy to access these new channels at the scale that they would like to be. Right. But certainly a massive shift in terms of the industry That's that's quite incredible. So, so Daniella, that was great. Now what are you seeing in this space that perhaps nobody else has seen? Yeah, it's interesting because I was just talking about asset managers partnering with the traditional wealth management firms, wealth advisors. But I see a huge opportunity for fintech companies to step in and play the intermediary that's going to bridge the gap between these asset managers and retail capital because. Right now, if you ask some of the wealthiest people, individual people who you know, the top five asset managers are, they are not as aware of them as they are, you know, some of the public companies that they're investing in. So brand awareness is going to be huge. And I think the big tech companies are going to step in and bring that marketing and and awareness to the investors that asset managers are trying to tap into. You know, investors want digital platforms that are customizable to their preferences and fintech companies can offer that via. Smart contracts or or tokenization or really any sort of digital platform that we're seeing demanded more and more. And does that mean that the asset managers have to partner with existing Fintechs or are they able to build these capabilities into the future to think? Yeah. I think there's an opportunity for both of build and buy could be one. Yeah. So it it kind of depends on where it's going to go, but there is opportunity. Fantastic. So the third question that I have is, you know, a lot of people comment on this space. What do they normally get wrong? Yeah. So it's a great question and something you and I talked about before. We're constantly hearing that hedge funds are disappearing. However, I disagree with that statement. I think what we think of as the traditional hedge fund, yes, maybe right now that isn't the most attractive option to investors in the foreseeable future, but we need to fundamentally shift our perceptions of a hedge fund. These vehicles are undergoing transformations and changing their core strategies and launching hybrid vehicles with venture capital arm or digital assets arm. So they're doing this in order to stay. Competitive and innovate and that's how they will continue to be successful. So we are going to see just a change in what we think of the traditional hedge fund. So they're not vanishing, they're just revamping their luck. So rumors of the death of hedge funds have been exaggerated, should we say? Think of it, Yeah. So next question, Daniela, let's say I work in this space. I'm a CXO of a large asset manager. What kinds of things should I be looking out for in this space with all of this transformation going on? Yeah. I think always thinking about the risk, right, with, with great opportunity comes great risk. So there is opportunity to attract capital amongst individual investors. We can't forget that the retail investor is not the same as the institutional investor. We're not comparing apples to apples here. Individual investors generally are less predictable as they can be more risk seeking and more emotionally driven and their investment decisions as compared to the traditional institutional investor like your pension fund. So this is something that should be front of mind for asset managers taking in retail. Capital, especially those with more illiquid investments that the individual investor might not be used to investing in. Got it. So the risks are different. The the customers have different buying patterns and all of that kind of comes together. It's a different operating environment, Daniella, we've talked about a lot, but what have we missed? Yeah. I I think 2 things to touch on that we haven't discussed is the regulatory aspect and the educational piece. With the increasing push into retail capital with these innovative product offerings, it's probably going to attract more regulatory scrutiny in a sector that's considered less regulated as compared to its public counterpart. Additionally, as more firms enter the private market space, competition for deals and investor capital is going to intensify. On the education front, the retail investor isn't aware, not all of them, but some of them might not be aware of the differences between alternatives. Unless the public equity investments, so it's gonna be crucial for the success of the expansion into the retail capital for education, investor education to be prioritized. Yeah, no, you're, you're absolutely right. You know, with, with transformation of the industry, you know, regulation is going to have to catch up. It's going to pose different risks. It's going to have a need for different customer experience. Technology's got to have a role to play. Listen, Daniella, that was really terrific. Great set of insights. Thank you very much for joining and thank you very much everybody else for tuning in. If you like this, please press one of the engagements buttons below. We'd love to hear your comments other than that. I'll say thank you very much for tuning in and we'll see you all next time. Bye, bye.