There is no shortage of issues confronting the wealth management industry in 2009 as clients react to the historic economic events of the past year. These events have removed any lingering doubts that what began as a subprime mortgage crisis has become a global financial crisis. This is leading to a fundamental restructuring of the global banking industry, with a significant effect on wealth management products, services and distribution. As it has done in the past, the industry will move forward, with an immediate focus on regaining the confidence of clients, shareholders, regulators and governments.
As the restructuring unfolds, the wealth management industry will emerge as an obvious beneficiary of a new economic order. The evidence is clear. Wealth management divisions of many global financial services companies have already been the recipients of reinvestment budgets and funding even as their parent companies face overall profitability challenges in the short term.
Wealth managers cannot ignore the immediate effect of what has occurred. As the dust continues to settle from the events of 2008 and 2009, some key consequences have emerged and firms’ strategic direction must now take them into account. First, both existing clients and prospects have suffered wealth erosion like they have never experienced before.
Second, skepticism of complex financial products has greatly reduced investor appetite for risk in their portfolios. Taken together, these two factors have created an atmosphere in which investors are much more reluctant to invest. However, this still is an area of growth.
Do you think the wealth management industry is poised to benefit from the economic crisis? To learn more about wealth management in 2009, download BearingPoint’s white paper.