How digital innovation and sustainability are shaping wealth management
During the third quarter of 2024, the wealth management sector witnessed shifts, heavily influenced by sustainability, digital innovation, and regulatory adjustments.
According to Kidbrooke, the escalating importance of climate risk modelling has become evident, with wealth managers integrating digital tools to meet the sophisticated demands of affluent clients. Additionally, the imminent enforcement of the Digital Operational Resilience Act (DORA) is compelling firms to bolster their ICT risk management and compliance frameworks, ensuring their competitive edge in a complex financial landscape.
The recognition of climate-related risks affecting client and investment portfolios has become paramount in wealth and asset management. Firms are increasingly proactive, embedding sustainability as a fundamental aspect of their strategic approach.
Authorities like the European Central Bank and the Bank of England are now implementing climate stress tests to evaluate the resilience of banks against environmental risks, with similar initiatives seen from the Swiss regulator FINMA.
Utilising established scenarios from the Network for Greening the Financial System (NGFS), asset managers are able to showcase their strategies in adapting to and mitigating climate change impacts. The benefits of this approach are multifaceted, enhancing investment decision-making, promoting sustainable financial products, and aligning with regulatory compliance—all contributing to increased client satisfaction and retention.
Kidbrooke plays a crucial role in this field by integrating IPCC climate scenarios into its economic scenario generators, aiding the industry in making more nuanced financial decisions.
India’s wealth management landscape is undergoing a profound transformation driven by the rapid adoption of digital technologies. This shift is redefining how services are delivered to high-net-worth and ultra-high-net-worth clients.
A recent survey by Hubbis highlighted the sector’s focus on enhancing customer experience through digital means, with significant investment in AI, data analytics, and automation noted among the firms surveyed.
The preference for digital engagement among younger affluent clients underscores the need for mobile applications and online platforms that provide real-time portfolio insights. By tailoring these digital solutions to individual needs, wealth managers not only improve client engagement but also foster loyalty and drive business growth.
With the Digital Operational Resilience Act set to come into effect on 17 January 2025, there is a pressing need for fund managers to revamp their data management practices. DORA introduces stringent requirements across multiple dimensions of ICT risk management, including incident management and resilience testing. This regulatory framework is critical for ensuring that European financial institutions can deliver innovative financial products safely.
Financial entities are now tasked with conducting thorough gap assessments to align their operations with DORA’s standards, preparing them for more complex future requirements such as third-party risk management and threat intelligence.
As we move towards the end of 2024, the importance of climate risk modelling, digital transformation, and regulatory readiness has never been more critical.
By embracing advanced analytical tools and robust API-driven solutions, wealth and asset managers are not only adhering to regulatory demands but are also enhancing their strategic decision-making capabilities, thus ensuring continued growth and competitiveness in a rapidly evolving market.
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