The private investor represents a significant portion of global wealth management and requires diligent operational services to achieve success. A recent publication by Boston Consulting Group (BCG) outlines three of the top trends in private investing. The growing needs of a private investor also create an increasingly important demand for private investing services and holistic private investing solutions, which are often managed by family offices.
Private Investor Trends
In June 2017 the Boston Consulting Group released a publication titled “ Wealth 2017: Transforming the Client Experience .” The publication identifies three key trends including growth, revenue, and digital.
Growth in Private Investing
In 2016, North America, Western Europe, Latin America, the Middle East and Africa reported significant growth in private investing with the Asia-Pacific region leading at just below double digits. Across the entire globe, private financial wealth reported a 5.3 percent increase in 2016 to $166.5 trillion.
According to BCG, the global market for private wealth is on track to reach $223 trillion by 2021. North America continues to lead by assets with $55.7 trillion in 2016 and a 2016 growth rate of 4.5 percent. Asia-Pacific, however, has been significantly increasing its private assets with the 2016 total at $38.4 trillion with a growth rate of 9.5 percent. The fast pace of growth in the Asia-Pacific region is expected to continue, as estimates show expected levels of wealth nearly matching North America by 2021 with $61.6 trillion. As the Asia-Pacific region continues to expand economically, there will be many new opportunities for private investing operational services.
Revenue in Private Investing
Revenue in private investments has also been a trend to watch in recent quarters. Since the 2008 financial crisis, a number of regulatory factors have influenced the private investment industry, adding pressure on revenue for private wealth managers specifically.
Another actor for private wealth managers has been the growing interest in passive funds. Private wealth managers have managed to track these trends closely with only minimal effect on profits which has helped to maintain industry activity. The changing market landscape has also caused some changes to private investor service models, specifically for wealth managers who have concentrated on making their operational processes more comprehensively consolidated and cost efficient.
Digital Transformations in Private Investing
A trend toward digital transformation and increased digital interactivity has also been important in private investing. According to BCG, the greatest digital focus for private wealth investing has been on improving portfolio functionality, trading and payment services.
Across the industry at large, private investors are demanding more digital interaction with their investments as well as expanded service capabilities. For private investing wealth managers, a greater demand for digital has also manifested broader cross-selling opportunities and the connectivity to offer one holistic investment servicing solution. In private investment operations, BCG reports that the digital focus currently provides advanced offerings for all aspects of trade servicing, credit management, documentation and reconciliation.
Operational Servicing Considerations for Private Investors
As the private investment market becomes more regulated, growth is expected to continue. Institutional private investor services offer a number of capabilities for managing private investments across the industry to help to support the efforts of wealth mangers and family offices. These services offer transaction clearing through central securities depositaries as well as record keeping services and secure custody operations.
In Europe, institutional private investor services can also help to facilitate bilateral trading and transactions throughout the European Union. Overall, financial technology and digital transformation are influencing all aspects of the financial markets and specifically creating expanded opportunities in the private investment market.
In the future, private investor services will continue to support the market operationally while also leading in digital innovation with an edge in some of the highest priority digital initiatives including intelligent workflows, distributed ledger technology, robotics, artificial intelligence and machine learning, agile operations, centralized data controls, cloud, APIs and big data.