The wealth management industry is undergoing a massive transformation. This shift results from many dynamics: changing demographics; the influx of new-generation investors; the increasing wealth of women; the increasing importance of personalization; democratization of access to private markets and widespread digitization. Fundamental industry change has long been predicted, but the pandemic has accelerated its pace, providing opportunities while also posing new challenges for wealth managers that hope to grow and thrive in the market.
Providing advice to wealthy individuals is a core competency of the wealth management industry. Such advice involves assisting clients in making investment decisions, while considering their unique circumstances, behaviours and the markets in which they live and invest. Moreover, client expectations and client pools are rapidly transforming, thus influencing the structure of financial advice. The call for more convenience, customized solutions, and tailored opportunities has grown louder. To stay ahead of the competition, wealth managers must realize that the challenge is not just about advice. It is also about building operating models that allow them to be not just an investment advisor, but a trusted counsellor on all matters financial in a scalable profitable way.
To better understand where the wealth management sector is heading, we sat down with Anna Zakrzewski, Global Leader of Boston Consulting Group’s (BCG) wealth management segment, to discuss how wealth managers and investors can better prepare for the industry’s ongoing transformation.
Aspioneer (AP): Thanks for being with us Anna. As Global Leader in Wealth Management for one of the Big 3 consulting firms, I’m sure many young women look up to you as a role model. We’d like to know more about the journey that brought you to where you are today.
Anna Zakrzewski (AZ): My journey with BCG started 21 years ago when I decided to move from Australia to Switzerland. I wanted to continue working internationally in a diverse and fast-paced setting that would also permit me to continue traveling. BCG provided me with an environment that both appreciated what I had to offer and allowed me to find my path – learning and freedom were truly important to me.
I’ve lived a very international life and experienced many different cultures and backgrounds. I was born in Poland, and grew up between Iraq, France, Germany, and the UK. I went to Australia get my university degree, focusing on economics and commerce.
If you had asked me 21 years ago to identify my primary interest, I would not have chosen the financial services sector. I was a very creative, highly energetic, artsy person with more ideas than days in a year at that time, some might say a little “wild”. The creative and energetic part is still here though somehow different – smiling. My path changed when I joined BCG and became part of a small, amazing team that started building out the firm’s wealth management segment and this became my home. I had the opportunity to grow together with the team and segment, from its very first steps to where it stands today. It’s been a truly fantastic journey in which I’ve been able to grow and develop, and in turn, help my clients grow and develop. When I think about wealth management, it is like consumer goods, or even luxury goods in banking with the client at the heart and centre – the human element makes it a very personal industry.
Every time I’ve moved up the career ladder within the firm, I’ve been faced with new challenges and offered new opportunities to develop, while having the freedom to chart my own course. Being able to continuously learn and pursue my curiosities, while being part of an incredible culture of likeminded and very diverse people, has been and is inspiring. In fact, working together with clients – wealth managers internationally – supporting them on challenging or new topics, being able to grow personally and professionally and working with my teams within BCG are the things that keeps me going every day – this gives so much positive energy.
AP: That sounds like an incredible journey, Anna. Moving to the segment that won you over, what is one the biggest factors in the wealth management industry’s ongoing transformation?
AZ: I would say the changing dynamics of potential investors and private individuals. Client pools are becoming more diverse, and the visibility of these client pools is also changing the way business is conducted. Clients are not looking for more – as there is so much being offered out there, they are today looking for better. For example, in recent years, women have assumed more responsibility for driving and growing their wealth, through inheritance or their achievements.
“Client pools are becoming more diverse, and the visibility of these client pools is also changing the way business is conducted”
In addition to the diversification of client pools, wealth is also being passed down to next gen, causing the ground to shift. The next-generation segment will be a key driver of future growth over the next decade and beyond. This segment, made up of people between the ages of 20 and 50, has more distant investment horizons, less aversion to risk than older segments, and often a wish to use their wealth to create positive social impact. Wealth managers must refresh their business models and approaches if they hope to meet the next gen’s needs, values, and expectations.
“Wealth managers must refresh their business models and approaches if they hope to meet the next-gen segment’s needs, values, and expectations.”
“When I feel like I’m creating value by being a trusted partner both to my clients and to my colleagues, contributing to positive change and transformation, I’m motivated to work even harder.”
AP: From pandemics to geopolitical conflicts, the past few years have changed the world drastically. How has this impacted the wealth management industry? And what should managers watch out for in the future?
AZ: Despite the economic disruption caused by the events of these past years, the future of wealth management continues to be promising. Nonetheless, wealth managers won’t be able to seize the available opportunities if they continue to conduct business as usual. Even before COVID-19, FinTechs changed the way people think about digital banking, and non-traditional players were applying for digital banking licences. The pandemic has altered the game even further, mainstreaming app-based transactions and digital relationships, and shifting consumer values.
There remains, of course, a large opportunity for wealth managers to deliver their services in an even more tailored way. This means making the right offering to the right client at the right time through the right channel. The proposition, advice, service needs to matter to the client and be personal – independent of the channel how it is being delivered.
“There remains, of course, a large opportunity for wealth managers to deliver their services in an even more tailored way. This means making the right offering to the right client at the right time through the right channel”
Ultra-high net worth individuals will be able to interact with relationship managers at the current levels – and some may still prefer digital or virtual interactions, especially as intergenerational wealth transfer progresses. For example, high-net-worth clients may continue to want to speak with a trusted advisor. But in a post-pandemic world, these relationships may shift to large parts to phone or video-based interactions rather than face-to-face meetings, reducing the need for office space.
Wealth managers should ask themselves how they can create an even better client experience in the hybrid business model, at scale, while remaining flexible to embrace future change. Digital enablement and smart use of data can help relationship managers deliver a far more tailored and personal service model to their clients, and simultaneously address the sustainability and automation of their own operating model. They also need to be aware of how to best utilize different channels seamlessly to optimize interactions. The goal should for relationship managers to be able to spend even more time with the right clients.
Wealth managers should also try to know their customers better beyond pure demographics and assets. They need to understand why customers are behaving in a certain way, how customers make decisions, how they trust, where they are in their lifecycle, what drives them, what their personal and financial goals are.
“Wealth managers should also try to know their customers better beyond pure demographics and assets – it is not just the WHO that matters, it is also the WHY”
AP: As you’ve mentioned, we’re witnessing the rising power of women as entrepreneurs and investors of wealth. What does the market need to understand to serve these customers optimally?
AZ: Attracting and retaining female clients will be a critical growth imperative for wealth managers. Firms will need to deeply understand women’s distinct financial needs, preferences, and behaviors in order to succeed. It is not about establishing “women’s banking”. Firms must not necessarily diversify their offerings and commit to a totally different systematic approach to helping women achieve their investment goals, however they need to understand that this segment is very diverse in itself, and deep dive on what their frictions are and how to become the right partner of choice to solve these frictions and deliver personal advice and service accordingly.
“Attracting and retaining female clients will be a critical growth imperative for wealth managers.”
And let’s not forget that women have become a powerful economic force. When looking at individual financial assets held by women, we see unparalleled growth in recent years. In 2020, women’s wealth reached $82 trillion globally, about 33% of the world’s total financial wealth. This is even more pronounced in the United States, where 38% of total private financial wealth, totalling $39 trillion, was controlled by women.
“In the United States, 39% of total private financial wealth, totaling $39 trillion,is controlled by women”
I see three key factors that wealth managers need to consider for female investors. First is truly recognizing the women’s wealth opportunity. Women are accumulating wealth at record rates, growth that’s expected to continue outpacing that in wealth held by men. This trend is being driven by stronger educational attainment and workforce participation. Women’s private wealth is expected to reach $110 trillion by 2025, or 35% of the world’s total financial wealth. Similarly, in just the United States, 40% of total private financial wealth will be in the hands of women by 2025, totalling $51 trillion.
Second, women tend to manage their wealth differently than men do, with goals more linked to specific life stages. Women’s investment calculus also tends to be more deliberate, and the proportion of cash in their portfolios is typically higher.
Third, there is no “one size fits all.” Women represent a huge and relatively untapped market, and wealth managers need to eradicate long-standing, gender-based as well as unconscious biases and focus instead on the individual investor. Banks commonly view the women’s segment from a marketing lens, not from a business revenue angle, and as a result a large share of women are feeling underserved.
“Banks commonly view the women’s segment from a marketing lens, not from a business revenue angle, and as a result a large share of women are feeling underserved”
AP: Climate change is one of the most pressing issues we face. While policies such as the Paris Agreement seek to move us to a net-zero world, billions of dollars are still invested each year in industries such as fossil fuels. As the public’s awareness of climate change grows, could we see greater investments in ESG funds?
AZ: There’s rising awareness that the planet’s environmental and climate challenges can’t be separated from social justice. And investors are increasingly putting Environmental, Social, and Governance (ESG) priorities at the top of their agendas. They’re asking that wealth managers meet their requirements and prove that they share the same values. Our own data estimates that private wealth held in sustainable assets will reach $36 trillion by 2025.
“Private wealth held in sustainable assets is estimated to reach $36 trillion by 2025”
ESG considerations will be a differentiating factor for managers in the short to medium term, and it will become the norm in the long term. It’s now an investor priority, particularly for the next generation (Millennials and Gen Z). To serve this community and enable the transition to a fully-fledged ESG operating model, there are four key levers for wealth managers. First, they must formulate a dedicated ESG strategy; and be bold in doing so. This vision should support the second lever—a service model that incorporates ESG across multiple dimensions, starting with products and services but extending to all aspects of the firm’s activities across the whole value chain. The third lever is ESG talent, which will be critical in creating a standout ESG proposition. Lastly, leaders should forge sharp communication strategies to ensure that internal and external stakeholders understand the transformation and endorse it.
“Sustainable investing/ESG can be a source of strategic advantage for wealth managers”
It’s also worth noting that the soaring popularity of ESG has created a bandwagon effect across industries, leading to consumer wariness of alleged “greenwashing.” Wealth managers should be careful in ensuring they are not caught up in these kinds of criticisms. Their ESG propositions should be centered not just around performance but also around sustainability impact and the ability to show and measure this impact transparently.
AP: Closing on a personal note, what motivates you to keep going in such a challenging field? What advice would you give to younger women?
AZ: When I feel like I’m creating value by being a trusted partner both to my clients and to my BCG colleagues, contributing to positive change and transformation, I’m motivated to work even harder. After more than twenty years at BCG, I can confidently say that I’m still full of energy and truly passionate about my work.
Of course it takes courage to grow, sometimes one fails and then learns from mistakes – yet this only makes us stronger. To younger colleagues I would say today: Have the courage to step up, embrace new challenges, do things you have not tried before and follow what inspires you. Make it happen with positive energy, kindness and passion! And with all this – just be YOU.
“When I feel like I’m creating value by being a trusted partner both to my clients and to my colleagues, contributing to positive change and transformation, I’m motivated to work even harder.”
AP: Anna, thank you so much.
AZ: Thank you for having me, has been a pleasure to exchange on relevant topics for the wealth management industry.
** Anna Zakrzewski has been with Boston Consulting Group since 2001 and is a core member of BCG’s Financial Institutions and Strategy practices. She leads the firm’s wealth management practice globally, and is also member of BCG’s Global Management Team for Financial Institutions. She is one of the leading co-authors of BCG’s annual flagship report on Global Wealth 2022: Standing Still Is Not an Option, and has driven its content development for many years.
