One year on from the GameStop saga, John Wilson, UK Managing Director at Avaloq, comments on how wealth managers can help more investors to look beyond the next market hype and focus on their long-term objectives.
The meteoric rise and subsequent volatility in the share price of US video game retailer GameStop last year, fuelled by Reddit traders determined to burn short-selling hedge funds, highlighted the substantial risks of short-termist investing. While many traders enjoyed a substantial windfall, others were less lucky when trying to time the market.
The challenge for wealth managers is to harness their clients’ eagerness to make high-risk investments while emphasizing the need for a disciplined, long-term approach to their assets. Wealth managers need to cut through the chatter on social media to deliver sound advice that also protects investors from getting swept up in the next meme stock bubble.
The potential of technology in wealth management
One of the key roles of wealth managers is to provide high-net-worth investors with a long-term investment framework underpinned by diversified portfolios.
Recently, technology has democratized investing, and the rise of intuitive do-it-yourself trading platforms like Robinhood has prompted more members of the general public to consider investing for the first time. Many established wealth managers have been struggling to keep up with the rapid pace of change in this new investment landscape.
Wealth managers now have the opportunity to open up their businesses to a wider audience by using powerful new technologies and enhanced data analytics. The capabilities of new tech platforms and operating models enable wealth managers to deliver highly personalized investment services at scale.
Access to new client segments
Growing momentum behind new investment opportunities and asset classes – such as cryptocurrencies – means that wealth managers will need to continue innovating or risk missing out on new trends and losing clients. By teaming up with technology leaders, wealth managers can access additional revenue streams and growth markets by catering to new client segments.
Wealth managers have a duty to help investors ignore unhelpful noise while leveraging opportunities that improve their financial outcomes in the long term. Innovative technology will put wealth managers in a better position to attract new investors and guide them on how to align dynamic market trends with their investment goals.