“Follow the money” is a pretty good rule of thumb for every fictional noir detective, but it works just as well in the world of financial services.
A new report from Bain & Company suggests asset managers and brokerages are increasingly adhering to that mantra, moving into wealth management as the Richie Riches of the world keep getting Richie Richer.
Rich Way the Wind Blows
The collection of asset managers now staking out positions in wealth management lines up like a hand of tarot cards forecasting a lucrative future. Last month, one of America’s largest asset managers, Charles Schwab, rechristened its private client unit the Schwab Wealth Advisory to promote its wealth management offering. The program’s average customer has $2 million invested.
Earlier this year, the Royal Bank of Canada unveiled plans to buy Brewin Dolphin, Britain’s largest wealth manager, for £1.6 billion. Last year, JPMorgan bought online wealth manager Nutmeg for $1 billion. The long-term outlook for handling the wealth of the wealthy, Bain researchers say, makes their motivation clear:
- Wealth management is expected to grow 2% faster than asset management every year to 2030, bolstered by successful individuals from the retail investing boom and a wave of expected inheritance recipients.
- The total wealth management industry, which includes asset management and financial planning, will grow 67% from $137 trillion under management last year to nearly $230 trillion in 2030, according to Bain forecasts. Asset management, a comparatively saturated business, will grow less than 40% from $109 trillion to $152 trillion, according to the forecasts.
“If you have a wealth management capability you have a much more valuable business,” John Waldron, Goldman Sachs chief operating officer, told the Financial Times.
Not All Investors Are Created Equal: Unfortunately, Bain found that a major driver for the growth in wealth management is rising global inequality and the concentration of wealth. The investable assets of wealthy people will double in nearly every part of the world by 2030, the firm estimates. Unless you’re one of the lucky few, it’s best to hang on to those Groupons.