Wealth management and private banking trends: 2020
Ross Jennings, Head of Sales and Relationship Management at RBC Wealth Management, on what the next decade holds for wealth management and private banking
We expect the next year to see a continuation of long-term shifts in the wealth management landscape, some of which are not unlike those we are seeing in the banking and finance industry more generally.
Operationally, greater integration of technology to improve the client experience will continue to be a key focus for wealth management firms. This is with the view to not only to respond to the demands of a younger, always-on, client base, but also to augment the role of relationship managers to give them the tools to better service their clients regardless of where they are.
Pace of wealth accumulation
Continued demographic diversification in the client base is another key trend that the industry will need to continue to adjust to. The pace of wealth accumulation among millennials and women of all generations will continue to increase as a result of the boom in tech-driven innovation.
This creates significant demand for wealth management advice and wealth preservation strategies, presenting a significant opportunity for wealth managers who can offer bespoke wealth management services to meet their needs, as well as, in turn, diversify their own workforce to be better aligned with the changing client demographics.
Another trend concerns the fact that life expectancy continues to increase, and families will find three and, in some instances, even four generations of family members alive at the same time, with newer members becoming successful entrepreneurs themselves in their own right.
Against this backdrop, independent advice and the ability to manage and represent often diverse interests while preserving the family’s legacy, will require wealth managers to create structures which will help families navigate that complexity in an environment that fosters collaboration between the different generations.
Finally, from a client perspective, I believe that there will be continued momentum throughout 2020 towards increasingly incorporating Environmental, Social and Government (ESG factors) into portfolios, with the aim to both protect and enhance returns for the long term.
Navigating uncharted territory
From an investment perspective, the industry’s biggest challenge and opportunity in 2020 will be to navigate the macroeconomic environment which continues to be categorised as ‘uncharted territory’.
We expect central banks’ 2019 accommodative monetary policies, as well as some additional fiscal stimulus, can keep most developed economies growing through 2020 and probably longer, continuing to support growth in corporate earnings, dividends and buybacks, though wealth managers should be cautious of inflationary pressures on over-exposure to stocks.
A well-balanced global investment portfolio should help clients avoid complacency. Furthermore, continued persistence of low interest rates means that the search for yield becomes even more important, with clients increasingly hungry for insights and ideas which will help them deploy capital effectively.
Wealth managers who are part of large global universal banks and thus have relationships across public and private capital markets will have an opportunity to become even more relevant to their clients in 2020.
Aviva Investors launch $350m global climate credit fund
Aviva Investors has launched a climate transition global credit fund and has already allocated US$350m in strategic capital.
The funding, which has been provided by Aviva’s UK and Irish multi-asset funds, will be used to invest in companies offering goods and services that support climate change mitigation and the move towards a more sustainable future.
According to reports, the fund is in line with Aviva’s ESG philosophy on green policies and the United Nations sustainable development goals. It will be handled by portfolio managers Justine Vroman and Tom Chinery, as well as the noted climate specialist, Rick Stathers.
Aviva sustainable investment strategy
Companies excluded from the investment fund will be those entrenched in the fossil fuel industry, while enterprises that look at solutions to climate-related problems, such as sustainable transport, renewable energy and environmentally conscious lending, will be targeted.
Aviva Investors confirmed the goal is to capture transition-oriented companies with low decarbonisation and physical impact risk.
The initiative will also be benchmarked against the Bloomberg Barclays Global Aggregate Corporates Index, investing predominately in investment-grade companies and a small allocation of up to 5% in high-yield bonds.
Colin Purdie, Aviva Investors chief investment officer for credit, explained, "We can't pivot to a lower-carbon world if all we do is rule out the poor performers and only invest in companies that provide solutions to climate change. All companies need to adjust for a warmer, lower carbon world, which is why we felt it was important to use a wider transition lens to capture a larger set of businesses beyond those with obvious green credentials."
He said, "As investors, it is our responsibility to look beyond small pockets of green finance to engage and mobilise the liquidity of the wider credit market to assist in climate transition and the achievement of net zero carbon emissions."
Purdie added, "Companies that don't adjust their business models will be less attractive to investors and will present a less compelling investment case over time. Climate laggards may find that their financing becomes more expensive than that available to climate leaders."