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How does the year 2021 look like for the Wealth Management industry

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The year 2020 was indeed a year of transformation for the whole world, mainly because of the COVID-19 pandemic and its consequences. It was challenging for many, but it also taught us to adapt to changes and innovate quickly. It also speeded up some existing trends that are likely to make our life more flexible and better in the future, such as digitalization and an increase in remote working. These trends apply to the Wealth Management industry, too. Let’s now take a look towards the year 2021 to see what kind of a landscape, trends, and new possibilities it has set up for the Wealth Management industry after the exceptional year of 2020.

In this blog post, we will cover the following topics:

      • Digitalization, automation, and going cloud keep accelerating
      • New trends and legislation push Asset Management business towards a more transparent and sustainable direction
      • Investors in a Post-Brexit World
      • Norway sets up new pension accounts for the employees of the private sector who have a defined contribution pension

Digitalization, automation, and going cloud keep accelerating

Digitalization, automation, and going cloud have been the Wealth Management industry’s critical trends before the transformational year 2020 already. This is in part due to a squeeze in profit margins due to end investors becoming more price sensitive, coupled with wealth managers tapping into a new generation of investors that are more accustomed to digital applications. However, the global pandemic causing total lockdowns and quarantines worldwide forcing most people and organizations to move to the full working-from-home state was the last push to set these factors as the standard for modern and efficient Investment Management.

These trends have been the basis for our business and product here at FA Solutions for two decades already. Because of our long experience working in and with major banks and financial organizations, we at FA Solutions realized the need for a proper Saas based Portfolio Management System already 15 years ago. Since then, we have aimed to provide our clients with a cutting-edge cloud-based platform for running their entire Asset & Investment Management business with secure access to data globally. We are happy to continue pursuing this mission, answering our clients’ needs and enabling them to grow their business in the ever-changing world.

New trends and legislation push Asset Management business towards a more transparent and sustainable direction

In addition to digitalization, one of today’s global megatrends, including all business areas, has been moving towards a more socially, environmentally, and economically sustainable world. The cause of this is individual consumers becoming more aware of their choices and their effects, and businesses have to follow the consumers’ needs and desires. This also applies to the Wealth Management industry, where the growing group of millennial investors is keen on positively impacting the world via their investment choices.

To cover this hot topic, FA will be hosting a webinar on Impact Investing & Philanthropy on February the 9th. As wealth managers shift towards sustainability, investors still struggle to quantify the impact, which is why our speakers will share their insights on emerging metrics that can be used to help investors make a positive impact. Read more and enroll in the webinar here.

The new legislation is also being introduced to make businesses meet these sustainability and transparency requirements and goals. The EU's new ESG disclosure regulation on sustainability-related disclosures in the financial services sector is due to come into force on March 10th, 2021. The regulation sets out detailed rules for fund managers, financial advisors, and many other regulated firms in the EU and those marketing their funds in the EU to tackle industry green-washing and funnel private investments towards genuinely sustainable economic activities. Read more about the legislation change and its consequences in the interview of FA’s Sales & Account Manager Oliver Syvänen by The Fintech Times here.

Investors in a Post-Brexit World

In addition to the COVID-19 crisis, the uncertainty in international politics caused uncertainty also in the Wealth Management industry last year. In Europe, the Brexit transition period has now ended, and a trade deal has been reached. However, the agreement excludes financial services. The UK government pledges to protect the financial services industry and maintain London’s status as a global hub. This will rely heavily on a bilateral agreement to grant equivalence status, allowing UK firms to passport across Europe.

In a recent webinar hosted by FA, 70% of the audience were optimistic as they believed that UK regulations would become less strict than European rules, despite Britain being a champion for key legislations such as MiFID. John Bohan, chairman of the fund administration firm Apex, shared an optimistic tone that London will maintain its status due to the concentration of fund managers, as well as intellectual and cultural capital. Whether or not equivalence is granted, asset managers will be able to continue marketing funds to British and European investors via third party ManCos.

Uncertainty still remains since the two parties have only agreed on the settlement of derivatives. Institutions such as exchanges and banks have had to open subsidiaries in Europe to continue trading European securities. Without equivalence, administrative costs could be passed onto end investors.

Norway sets up new pension accounts for the employees of the private sector who have a defined contribution pension

From February 2021, 1.5 million Norwegians will have their own pension account where pension earnings from both current and previous jobs are gathered in one place. The scheme applies to employees in private companies who have a defined contribution pension. Pension earnings are, in principle, automatically collected by your employer's pension provider unless you reserve yourself for such a collection.

The new scheme aims to reduce the fees that employees currently pay on pension earnings from previous employment, which will ensure consumers more in pension. At the same time, consumers will have a better overview of their pension savings when the pension funds are gathered in one place. They will be able to choose whether they want their pension account with their employer's pension provider or a pension account with another provider, a so-called self-selected supplier.

What is new is that this is done automatically for many consumers unless they make a reservation and merge previous earnings in pension capital certificates with pension earnings made in defined contribution pensions in current working conditions.

Those who currently work in the public sector, are unemployed, or people moving abroad are not covered by the scheme and must take care of themselves. For these groups, the advice still applies to collect their pension capital certificates from one company and choose another that does not charge an administration fee.

Despite all the changes and challenging times, we at FA think that these unexpected transformations may have only increased our ability to innovate, focus on the most important and accelerate the Investment Management business towards a more efficient, agile, and impactful way. Automate and Accelerate is what we will continue doing in 2021 to enable our clients’ Wealth management business to bloom and grow in the ever-changing world.

If you wish to learn more about the FA Platform - kindly contact us and we will guide you through, or request a demo here.

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