Preparation is Key for Asset Managers: Embrace the Future or Risk Being Overshadowed
Michael Martinez is the Vice President of Market Strategy at TradingBlock, a company that offers bespoke trading technology solutions.
The young generation is on the brink of a massive wealth transition. Over the following two decades, more than $84 trillion will be inherited from elders, as per findings from Cerulli Associates. Millennials and Gen Z are soon going to make up a substantial portion of high-net-worth and ultra-high-net-worth investors. To stand out in this cutthroat market, asset managers must adapt to the changing expectations of future investors.
Expectation for Personalization and Alternatives
Younger generations desire digital and highly personalized experiences that seamlessly blend with their daily routines. They are accustomed to having immediate access to customized information and services in line with their unique preferences and behaviors.
Though retailers might have pioneered meeting these demands, younger generations now anticipate data-driven, personalized experiences from any brand they engage with—this includes asset managers as well. In return for sharing their data, consumers hope to receive more personalization, which consequently enhances value. According to a Salesforce report, 73% of consumers expect better personalization as technology progresses.
Moreover, younger generations are less interested in traditional investments compared to their elderly counterparts.
A Bank of America Private Bank study revealed that wealthy individuals aged 21 to 43 preferred six distinct alternative investments over stocks. Whether attribute this behavior to the belief that exceptional returns are no longer obtainable through traditional assets or the lowered barrier to entry for many alternatives in recent times, asset managers must be aware.
As young individuals are more inclined to favor alternatives over stocks and bonds, asset managers should be prepared to present investment opportunities such as options, digital assets, private equity, and other non-traditional assets that correspond with their evolving financial aspirations and risk tolerance.
Choices for Clients: Tactical Vs. Strategic Use
Armed with lifelong internet access and the vast information it provides, numerous young investors understand options and expect their asset managers to comprehend more and offer enhanced instruction.
While considering options for clients, it's important to differentiate between tactical and strategic use. Strategic use integrates options as part of a long-term strategy, while tactical use centers on managing short-term events or market activities.
Regardless of overall market volatility, specific stock movements, concentrated positions, or sector fluctuations, options can be a valuable aid in managing risk and capitalizing on market opportunities.
Implementing options, especially for tactical purposes, necessitates robust relationships with clients. Effective communication and comprehending their requirements are essential. Regardless of the context, utilizing options effectively relies on a foundation of knowledge and client trust. Unlike traditional investments, options strategies are typically more intricate and require comprehensive instruction on factors such as strike prices, expiration dates, and implied volatility. Again, asset managers carry the responsibility of providing this instruction and ensuring that investment strategies match client expectations, like financial goals, risk tolerance, and timeframe.
Increasing Dependence on Data and Technology
To deliver digital and highly personalized experiences, asset managers must enhance their data and analytics utilization. And many already understand this.
Reliance on data and analytics was identified as the foremost trend in asset management within the next three to five years by both asset managers and asset owners, according to a BNY study, which also found that 68% of asset managers plan to enhance their use of data analytics, insights, and digital capabilities.
Presenting quantitative, meaningful, and actionable data is crucial. This encompasses portfolio performance metrics, risk and volatility data, and investment horizon and objective tracking, among other examples.
Tools such as online trading platforms and customer relationship management software will grow increasingly important as asset managers seek to optimize operations, deliver tailored digital experiences, communicate risk and reward effectively, and spend more time focusing on what they excel at—intelligent asset management and cultivating strong relationships with their clients.
As new technology infiltrates the industry, and next-generation clients expect customized experiences and alternative investment options, it's essential for asset managers to prepare for the impending changes.
Those who leverage data and new digital tools while embracing changing client preferences will be better placed to succeed. Laggards will be left behind.
Options entail substantial risks and are not suitable for all investors. Please examine Characteristics and Risks of Standardized Options prior to investing.
The data provided here is not financial, investment, or tax advice. You should consult with a licensed professional for advice specific to your situation.
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Michael Martin, being a part of TradingBlock's leadership, might play a significant role in implementing personalized experiences and exploring alternative investment options for the company's young clientele, given their increasingly digital and diverse investment preferences.
As the Vice President of Market Strategy, Michael Martinez could spearhead TradingBlock's efforts in enhancing data analytics and digital capabilities, aligning with the growing expectation among younger generations for tailored, quantitative, and actionable investment insights.
