War and strife will almost certainly dominate global politics in 2024. The unrest will also add to the plight of investors as they try to navigate market conditions not seen in decades — and the impact of two wars and a looming new axis of adversaries may yet test the resolve of markets and investors.
Along with the upheaval (both human and economic) of war, investors will face the arrival of new technologies in wealth management. But the changes wrought from rising interest rates will also give rise to a mundane, yet much-needed, tool. Forrester believes that the wealth management industry will once again see the rise of new and old forces that will confuse, help, and hinder investors. Savvy, forward-thinking managers will sift through the noise and hear the clear signals of these predictions for 2024:
- AI will not be ready for prime time. Much-hyped generative AI (genAI) capabilities hold great promise for wealth managers and, we daresay, for humanity. But the simple fact is that the technology is not ready for wide distribution and use. We predict that a wealth manager will jump ahead, realize that they aren’t ready for AI deployment, and end up beating a hasty retreat. Why? The successful use of genAI takes alignment of multiple factors, not the least of which is an effective explainable AI capability. Absent proof (with explainable AI) that genAI is acting on the clients’ best interests, wealth managers will have to pull back on their AI aspirations until they can deliver an “objective advisor” through careful deployment of a full suite of AI capabilities, not just the hyped ones.
- Bonds have roared back, and mobile investing apps will play catch-up. Our research has shown that leading wealth management firms offer their clients a full range of trading and research capabilities on their mobile devices. The problem is that nearly all those mobile apps cater to equity investors. Want to buy a bond while waiting for the bus? Good luck. As investors, young and old, grow enamored of the yields offered by fixed income securities, leading wealth management firms will have to provide them with better mobile investing tools. We predict that at least one firm will create bond screening and trading tools for its mobile app in 2024.
- Foggy regulations (and some divisive politics) will dampen demand for ESG. Investing with an environmental, social, and governance (ESG) focus has struggled to make it to the mainstream. We predict that 2024 will be another tough year for wealth managers looking to grow their rolls of ESG investors. Regulatory changes in Europe and growing anti-woke political rhetoric in the US set the stage for another tough year for ESG investing, and we might as well layer doubts that ESG is an effective investment strategy onto that heap. Upping the number of ESG investors will take a concerted effort from wealth managers who can raise awareness and interest in these investments. At best, inflows to ESG products will remain flat in 2024.
The bad news is that 2024 won’t be easy for wealth managers or, for that matter, investors. The good news is that the industry has proven itself adaptable and resilient in the face of upheaval and finds ways to emerge stronger. Most importantly, the adaptive thinking of leading wealth managers who remain focused on creating customer value will ultimately benefit the consumer.
Forrester clients can read our full Predictions 2024: Wealth Management report to get more details about each of these predictions, plus one more. Look out for our webinar covering our wealth management predictions on January 31, 2024, and set up a Forrester guidance session to discuss these predictions or plan out your 2024 strategy.
If you aren’t yet a client, download our complimentary Predictions guide, which covers our top predictions for 2024. Find additional complimentary resources, including webinars, on the Predictions 2024 hub.