Francis Menassa, JAR Capital: Wealth 2.0 – The evolution of the wealth management industry

By Francis Menassa, Founder of JAR Capital, an independent wealth and asset management firm based in St. James’s, London

Francis Menassa

No industry is immune to disruption from technology and the wealth management industry is a great example of this. In recent years, the rise of financial websites, apps, social media, and ‘robo-advisors’ has changed the industry dramatically.

However, while technology is having a big impact on the wealth management industry today, it is unlikely to replace humans completely. That’s because wealth management is very much about people and trust, and clients require a tailored, flexible approach. While technology can enhance processes, it can’t replace face-to-face communication and relationships. 

Francis Menassa

Wealth management challenges

Since the Global Financial Crisis of 2008/2009, wealth managers have faced a number of challenges. Low interest rates, increased scrutiny from regulators, competition from innovative FinTech players, and calls for more focus on sustainable investments have all made life difficult for wealth managers.

Yet the biggest change that I am seeing right now is actually related to demographics, and more specifically, the world’s ageing population. With Baby Boomers retiring in droves, we’re on the cusp of the largest transfer of wealth in history. Indeed, according to Cerulli Associates, over the next 25 years almost $70 trillion will be transferred to younger generations and charity in the US alone. Meanwhile, CBInsights predicts that in just over a decade, Millennials will control $20 trillion of assets globally.

This transfer of wealth is likely to have a huge impact on the wealth management industry as the younger generation tends to do things quite differently to the older generation. For example, having grown up with the internet and smartphones, Millennials are hyperconnected, and they want to be able to access information at all times. They also communicate very differently. Whereas older clients may prefer a telephone call to discuss investments, younger clients may be happy with a quick Whatsapp conversation.

Francis Menassa

In addition, younger clients often have a strong focus on ethics and sustainability. According to Deloitte, two thirds of these clients are concerned about the state of the world and feel obliged to make a difference. This is good news for wealth managers that have a sustainable focus as this area of investing is likely to grow rapidly.

The growth of robo-advisors

Furthermore, Millennials are often quite price sensitive as they live in a very competitive economic landscape. This has significant implications for the wealth management industry as ‘robo-advisors’ are able to offer lower costs than more traditional wealth managers. Deloitte predicts that by 2025, over $16 trillion of assets could be managed with the support of robo-advisory services.

Robo-advisor technology has certainly come a long way in recent years. With advances in big data and artificial intelligence (AI), information can now be collected from a wide range of sources and platforms and then processed in real time to help monitor, analyse and manage investment portfolios. AI is also adding a lot of value in the risk management space, as it can automate data analysis and help identify red flags early. While the technology is likely to continue improving in the years ahead, a 2017 survey by EY and Finantix found that 71 percent of wealth managers believe that clients are ready to take financial advice from robo-advisors.

Francis Menassa

Yet don’t expect younger clients to completely relinquish traditional forms of communication such as face-to-face meetings. According to recent research by Deloitte, 82 percent of younger clients say that they would appreciate more personal meetings with their wealth manager, which shows that technology is not a like-for-like substitute for personal interactions.

Many opportunities

Overall, while there are challenges for wealth managers today, it’s likely that there will be plenty of opportunities in the years ahead as demographics impact the industry. Technology will definitely impact the industry, however, it is just one part of the overall picture. Given that wealth management is all about people and relationships, human interaction is likely to remain a crucial component of the wealth management process.

Francis Menassa is the CEO and Founder of JAR Capital. After 20 years in private banking and wealth management, Francis Menassa is always thinking of ways he can give back to the charities in London and the UK. His philanthropic efforts extend to DEBRA, a charity that supports individuals and families affected by Epidermolysis Bullosa.

Francis Menassa biography