Digital Wealth: The industry’s predictions for 2021

By Oliver Smith on Thursday 17 December 2020

Savings and Investment

We asked 5 industry experts what they think is in store for the digital wealth management industry next year.

Digital Wealth: The industry’s predictions for 2021
Image source: Company supplied.

As anyone who read AltFi’s Digital Wealth State of the Market report when it was published earlier this month will know, the digital wealth industry has seen huge changes triggered both by Covid-19 and ever-increasing digitisation.

But, what do those working in the sector expect will happen over the next 12 months?

More partnerships, collaboration, the rise of gold, a growing acceptance of Open Finance and more, here are the industry’s top predictions for 2021:

There’ll be partnerships galore

Caroline Murphree, CEO Europe of Wealthsimple

While we’ve seen consolidation in the industry as a key theme over the past couple of years, we also believe 2021 will re-focus on collaboration between more traditional players and fintechs. 

This year has accelerated many companies’ plans to launch their own digital wealth propositions, in light of the pandemic and the low-interest-rate environment. They are increasingly looking to fintechs to help them build more scalable, customer-centric digital journeys, on modern, flexible platforms. 

These partnerships can be mutually beneficial, providing new technologies with opportunities to scale and enabling financial institutions to deliver their products in innovative, digital ways that keep pace with evolving customer expectations. And for the end client, greater accessibility and choice helps people make more informed decisions to build the financial future they deserve.

Our industry will move from competition, to collaboration

Sam Handfield-Jones, co-head of Seccl

I think we’ll start to see a shifting narrative away from the apparent divide between ‘modern robos’ and ‘traditional wealth managers’.

There’ll be greater collaboration between the two (somewhat falsely drawn) camps—as existing businesses look to take advantage of the compelling UX and strong digital foundations of younger firms; while younger challengers seek to exploit the expertise and distribution of their more established ‘competitors’.

And collaboration aside, I reckon both will start to meet in the middle. Even the most established firms will want to double-down on digital and promote new technical skills within their organisation. While challengers will, I think, raise their ambitions and develop richer, fully-fledged digital advice propositions.

After all, for all the talk of ‘robo-advice’, most of the first wave of investment fintechs weren’t particularly ‘robo’ and definitely didn’t give ‘advice’. The tide had already started to turn—with firms like Multiply.ai offering regulated advice powered by AI—but I think the experience of the last year and the growing uncertainty around household finances will accelerate demand.

We’ll see growing support for Open Finance in the pensions industry

Clare Reilly, chief engagement officer at PensionBee

Following such a huge year of change, it seems challenging to predict what might happen in 2021! But my hope would be that we see increased support for the inclusion of Open Finance in pensions, to help the 52m adults in the UK with pension savings achieve better financial outcomes.

Despite often being the largest financial asset that people will have in their lives, there is still no way to get any standardised data in digital form about their pensions. This is completely at odds with our collective need to take responsibility for our retirements, feel a sense of ownership and make informed decisions. Too many people are completely in the dark about how much they have saved, how much they pay in fees, how well their pension is performing—and importantly, will they have enough to last them in retirement. Open Pensions will solve all of these issues and help create a generation of informed, engaged, proud and prepared savers at a time when this is most needed.

We’ve taken huge steps forward with Open Banking in 2020 with consumers increasingly managing their finances digitally, and I predict more and more consumers will expect the same level of visibility over their pension as the Covid-19 pandemic continues into next year.

Gold’s role as the ultimate store of value will increase as it evolves into an everyday global currency

Jason Cozens, CEO and founder of Glint

Given the continuing uncertainty over several macro factors, from Covid to the weakening dollar, I see gold remaining the premier option for anyone who wants to preserve their wealth, big or small. 

The hitherto slow but now accelerating push by central banks to develop their own digital currencies (CBDCs) will strengthen the move away from cash towards e-money, but consumers everywhere will have justified suspicion over government interference with their money, fiat or otherwise. In this broad-brush context, the adoption of digital alternatives to fiat money - be that gold or cryptocurrencies - is bound to shift into a higher gear in 2021.

For all of the above reasons there has been a growing thirst for alternatives to fiat currency since the 2008 crisis. This has gained momentum thanks to Covid-19. 

There are problems with crypto-currencies. Bitcoin transaction costs spike dramatically with increased activity. 

The idea that cryptocurrencies are immune to human intervention is clearly a myth. Crypto miners and coin owners all have different agendas and a say in defining the nature of a crypto-currency. There is also a growing list of governments that are banning cryptocurrencies. Although the anonymous nature makes this hard, they have great success at stopping the exchange of fiat to crypto.

As people begin to appreciate the inefficiencies of Bitcoin and that Bitcoin is a human creation (and therefore open to corruption) they are increasingly turning to independent and immutable gold, trusted globally especially now that Glint has enabled it as a global everyday currency.

The human touch will remain in digital wealth

Schuyler Weiss, CEO of Alpian

Disruption is a term that is often used too quickly when it comes to banking, but no one can argue the fact that 2020 has brought seismic changes which have reshaped how we see our finances and how they are managed. 

The private banking sector has been thrust into the digital age and cutting edge technology is enabling clients to interact with their bank or wealth manager more easily than they ever have before. However, technology alone is not enough—banks must combine the support of human advisors with technological innovation. Getting this balance right will be key to success for emerging digital-first innovators and traditional players alike.

Technology is also opening the door to private banking services for a group of people who were previously priced out. As those in this mass affluent segment look ahead to what they want to achieve in 2021, a banking service which offers tailored advice that is easily accessible will be key to helping them not only grow their wealth but allow them to focus on that which is truly important, whether that’s more time spent with family or making that career move they always dreamed of. 2020 has seen many people reassess their values and it is now the role of private banks and wealth managers to ensure that our services truly reflect those values.

Not what you predicted? Let us know your 2021 digital wealth predictions @AltFiNews.

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