Investing
Wealth 2.0: the future of wealth management

By Francis Menassa, Founder of JAR Capital, an independent wealth and asset management firm based in St. James’s, London
No sector is immune to disruption and innovation has already started to reshape wealth management amid the growth of robo-advisers and new digital communication channels. However, in an industry where clients require a tailored and flexible approach, technology is complementary to wealth managers’ activity but cannot replace them since no algorithm is more powerful than trust. Wealth management remains foremost a people business.
I. Millennials and the Great Wealth Transfer

Francis Menassa
In the post-financial crisis landscape, wealth managers are facing profound changes in their market environment. A combination of fast developments in technology and competition from fintech players, a tighter regulatory context, ultra-low interest rates, more emphasis on socially responsible investing (SRI) are calling the traditional wealth management model into question. However, the single greatest shift I am witnessing right now is demographic. We’re on the cusp of the biggest wealth transfer in history. Research by Cerulli Associates forecasts that in the US alone, nearly 45 million households will transfer a total of U.S.$68.4 trillion in wealth to children and charity over the course of the next 25 years. Meanwhile, CBInsights predicts that by 2030, Millennials will control U.S.$20 trillion of assets globally and their parents (the baby boomers) will pass down another U.S.$30 trillion by 2050 in North America alone. The generational shift in wealth will impact the wealth management landscape over the next quarter century in an unprecedented way, since Digital Natives’ approach to wealth management differs greatly.
II. The need for a more client-centric approach
In some families I have been working with for generations, while the parents wanted everything on paper, their children use cloud storage, remote access and communicate via new channels such as WhatsApp. Having grown up with ubiquitous digital technology, Millennials are hyperconnected and demand more communication and transparency from their wealth manager, expecting the latter to be available 24/7. They live in a very competitive economic landscape, and therefore are more price-sensitive than their elders. Millennials are witnessing first-hand the deployment of a new wave of automation and robotisation spurred by the Fourth Industrial Revolution. Deloitte estimates that by 2025, over U.S.$16.0 trillion assets under management (AuM) could be managed with the support of robo-advisory services. A 2017 joint survey by EY and Finantix found that 71% of wealth managers believe clients are ready to take advice from robos. The fast development of Big data and Analytics will transform the sector: real-time information collected from a variety of sources and platforms, from social media to the sensors of smart homes and connected object, could be analysed to continually and automatically rebalance portfolios. Artificial Intelligence (AI) will be of great assistance in risk management and compliance, where it will automate data analysis, reduce the burden of administrative tasks and therefore allow humans to focus on higher value-add activities.
“Without facts and principles, data is useless” – Bob Hoffman
However, do not expect even the youngest clients to relinquish traditional media and face-to-face meetings. According to research by Deloitte, 82 percent of younger clients would appreciate more personal meetings with their investment adviser, showing that technology is not a substitute for personal interactions. Another notable difference compared to previous generations is Millennials’ ethics: 75 percent of them claim they want to remain ‘authentic’ and refuse to compromise family or personal values (Deloitte). In addition, almost two-thirds are not only concerned with the state of the world, but also feel obliged to change something, demonstrating that SRI investing has bright days ahead. This is a double whammy from our perspective since investing in sustainable and ethical assets offers another mechanism of due diligence. The other good news is the expansion of the Millennial market. The global volume of HNWI+ will increase by around 25% to almost U.S.$70 trillion by 2021, with demand stemming mainly from the US, China, Russia, Brazil and India, EY forecast in its 2018 Wealth Management Outlook. Many opportunities lie in this new distribution of wealth. Technology will undoubtedly assist and augment us. It is, however, just one part of the overall picture: many white spaces still need to be filled in the wealth management market.
Investing
Stocks slip from highs; investors wait on Fed

By Matt Scuffham
NEW YORK (Reuters) – Global stocks slipped from record levels on Tuesday, with investors cautious as the Federal Reserve kicked off its two-day policy meeting and U.S. lawmakers continued to debate a new stimulus plan.
Those concerns overshadowed impressive results from a slew of companies, including from General Electric and Johnson & Johnson, which had earlier pushed the S&P 500 to a record high.
“Investors don’t expect the Fed to give any reason to think they are getting closer to talking about when they will consider scaling back QE, but nervousness is brewing on Wall Street,” said Edward Moya, senior market analyst at OANDA in New York.
Wall Street’s main indexes closed lower.
The Dow Jones Industrial Average fell 22.96 points, or 0.07%, to 30,937.04, the S&P 500 lost 5.74 points, or 0.15%, to 3,849.62 and the Nasdaq Composite dropped 9.93 points, or 0.07%, to 13,626.07.
The MSCI world equity index, which tracks shares in 49 nations, fell 1.99 points or 0.3%, to 666.09.
After a “buy everything” rally over several months supported by money-printing pandemic stimulus packages, near-zero interest rates and the start of COVID-19 vaccination programs, some investors are worried markets may be near “bubble” territory.
They point to rocketing prices of assets such as bitcoin or the soaring stock of short-squeezed videogame retailer GameStop.
“There is room for some consolidation,” said Francois Savary, chief investment officer at Swiss wealth manager Prime Partners.
Uncertainty over the timing and size of fiscal stimulus also tempered sentiment.
Disagreements have meant months of indecision in the United States, where new coronavirus cases have been above 175,000 a day and millions of people are out of work.
Democrats in the U.S. Senate will act alone to approve a fresh round of stimulus if Republicans do not support the measure, Majority Leader Chuck Schumer said.
U.S. Treasury yields were narrowly mixed in choppy trading, after hitting three-week lows on the long end of the curve, as investors remained cautious about the stimulus and the slow global roll-out of coronavirus vaccines.
Benchmark 10-year notes last rose 2/32 in price to yield 1.0347%.
The U.S. dollar edged lower across the board as traders showed a preference for riskier currencies.
The dollar index fell 0.2%, with the euro up 0.21% to $1.2162.
European stocks advanced, shrugging off political upheaval in Italy, as strong earnings from wealth manager UBS and auto parts maker Autoliv added to a string of upbeat corporate updates.
The pan-European STOXX 600 index closed up 0.6%, with a rally in automakers, industrial companies and SAP helping the German DAX outperform.
Europe’s broad FTSEurofirst 300 index added 0.64%, at 1,573.47.
The IMF raised its forecast for global economic growth in 2021 and said the coronavirus-triggered downturn in 2020 would be nearly a full percentage point less severe than expected.
Italy’s FTSE MIB rose 1.2% after Prime Minister Giuseppe Conte handed in his resignation to the head of state, hoping he would be given an opportunity to put together a new coalition and rebuild his parliamentary majority.1.2163
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 11.47 points or 1.58% in Asia overnight. South Korea and Hong Kong topped losers, each falling more than 2%. The sell-off also caused Japanese stocks to slip 1% and Chinese blue-chips to tumble 2%, their biggest one-day loss since Sept. 9.
All had touched milestone highs earlier this month.
Gold prices edged lower. Spot gold dropped 0.2% to $1,850.63 an ounce. U.S. gold futures settled down 0.2% at $1,850.90.
U.S. crude oil futures settled at $52.61 a barrel, down 16 cents or 0.30%. Brent crude futures settled at $55.91 a barrel, up 3 cents or 0.05%.
(Reporting by Matt Scuffham; Editing by Dan Grebler, Mark Heinrich and Sonya Hepinstall)
Investing
Current cryptocurrencies unlikely to last, Bank of England governor says

By David Milliken
LONDON (Reuters) – No existing cryptocurrency has a structure that is likely to allow it to work as a means of payment over the long term, Bank of England Governor Andrew Bailey told an online forum hosted by the Davos-based World Economic Forum on Monday.
“Have we landed on what I would call the design, governance and arrangements for what I might call a lasting digital currency? No, I don’t think we’re there yet, honestly. I don’t think cryptocurrencies as originally formulated are it,” he said.
Bitcoin, the best-known cryptocurrency, hit a record high of $42,000 on Jan. 8 and sank as low as $28,800 last week, far greater volatility than is found with normal currencies.
“The whole question of people having assurance that their payments will be made in something with stable value … ultimately links bank to what we call fiat currency, which has a link to the state,” Bailey said.
The BoE, like the European Central Bank, is looking at the feasibility of issuing its own digital currency. This would allow people to make sterling electronic payments without involving banks, as is currently possible with banknotes, and would in theory help avoid the volatility that renders bitcoin impractical for commerce.
Bailey said the appropriate level of privacy for digital currencies was likely to be hotly debated and was potentially underrated as a challenge in setting one up.
“This is a big one that is coming on to the landscape, the whole question of a privacy standard for transactions made in any form of digital currency, and where the public interest lies,” he said.
(Reporting by David Milliken, editing by Tom Wilson and Alistair Smout)
Investing
EU sustainable investment rules need better corporate data – banking report

By Simon Jessop and Kate Abnett
LONDON (Reuters) – European Union rules aimed at defining sustainable investments should help reduce “greenwashing” by businesses, but better quality corporate data is needed to ensure they work effectively, a banking report said on Tuesday.
The sustainable finance rules will classify investments that can be marketed as sustainable, a move aimed at steering much-needed cash into low-carbon projects to deliver the bloc’s climate goals.
From January to August 2020, 26 of the region’s biggest lenders tested the EU framework across a range of core banking processes, including retail banking, trade finance and lending to smaller companies.
As the main providers of finance to companies across the EU, the ability of the banking system to track and report on whether corporate activities are sustainable or not could prove crucial in assessing the rules’ success or otherwise.
The lenders broadly welcomed the regulations as they seek to align their businesses with the transition to a low-carbon economy, the report by the United Nations Environment Programme Finance Initiative and the European Banking Federation found.
However, they also raised a number of issues, many of which were data-related and could require a phasing in of reporting requirements.
While many large companies are already required to disclose certain environmental and social information by law, the bulk of smaller and mid-sized banking clients are not, hampering banks’ assessment of their alignment with the rules.
Concerns over the quality, detail and standardisation of data is also an issue when looking at banks’ lending overseas, something that would be made more complex as other regions launch their own regulations.
The banks who tested the EU rules called on regulators to seek global alignment of regulations, and for better tools to manage data from clients, such as a centralised EU database.
While under no compulsion to lend to activities that can be classed as sustainable, banks see sustainable finance as a growth area that is likely to take on more importance in coming years should policymakers tighten environmental legislation.
With more investors globally looking to become shareholders of companies with a good record on managing environmental risk, banks are also likely to look to reduce their exposure to environmentally or socially harmful activities over time.
The European Commission is expected to finish the section of the rules covering climate change in the coming months, before they take effect in 2022.
(Reporting by Simon Jessop and Kate Abnett; Editing by Pravin Char)