Regulatory scrutiny, client expectations shaping wealth management: PwC

Stricter regulatory oversight and more demanding customers are forcing wealth management firms to change their client service infrastructure and operating practices, according to a PricewaterhouseCoopers (PwC) report.

Wealth management continues to be a lucrative business, with untapped potential for growth, provided institutions are proactive in adapting to the changing demands. New competitors are challenging the dominance of established firms, resulting in a reworking of their operations. Those who master change, would be in a position to win an increased market share and lead the industry, the report, 'Anticipating a New Age in Wealth Management', said. The report surveyed 275 institutions across 67 countries.

Clients are cautious, smart and less loyal and expect excellent service and clear value, according to the report. Wealth management firms need greater operational efficiency and effectiveness, not just to compete, but to survive. Being stagnant is no longer an option and institutions must now quickly adapt or face being left behind, it said.

Wealth managers would need to diversify their client bases, while increasing their awareness of non-traditional, high-growth emerging market countries, the survey said. It also added the industry faces pressures in many areas. First, the fabric of the wealthy investor has been transformed as a result of the global financial crisis and recent scandals. Clients are more active in managing their affairs and are paying increased attention to reputation.

Second, there is shift in the pattern of world wealth between emerging and established markets. A tougher regulatory oversight presents challenges for some wealth managers and opportunities for others.

The dearth of talent is one of the biggest barriers to future growth. Talented people are becoming more valuable, more difficult to source and more expensive to train. The industry is also becoming better at institutionalising client relationships with organisations, the report added.