Private Banking: A bright future ahead

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Total global wealth surpassed USD463.6 trillion in 2021 and the number of millionaires surpassing 87 million by 2026.

  1. Sustainable Investments: Sustainable investment is going mainstream, with more investors focusing on generating long-term financial returns while contributing positively to the environment and society. Bloomberg reports that ESG investments will exceed USD53 trillion by 2025, representing over a third of the projected total assets under management (AUM) of USD140.5 trillion. As ESG-linked products become more widely available, cautious investors will increasingly seek evidence of measurable impact. The spotlight will shine on disclosure gaps. In the year ahead, expect wealth management firms to continue seeking internationally recognized metrics & platforms that can provide these metrics in real-time, to ensure fair and accurate sustainable investment comparisons.
  2. Digital Assets in Demand: Investors seeking to diversify their portfolios are turning to digital assets. And they want information on everything from cryptocurrencies to indirect crypto investment through exchange-traded funds (ETFs), NFTs, metaverse-related products, and digital currency – all backed by Blockchain technology. According to TDB Insights, Blockchain technology-driven investments in the global banking industry currently stands at an estimated USD2.5 billion with a 70% CAGR growth forecasted during the 2023-2030 period. Moreover, the adoption rate for blockchain services is incredibly fast, with an estimated 81 million users worldwide just this year.
  3. Direct Indexing (DI) is the buzzword: Portfolio diversification is extremely important in 2023 given the economic and geopolitical backdrop. Whether building a new portfolio or making changes to current investments, direct indexing is being considered by many private banking clients. Direct indexing seeks to replicate an existing stock index, such as the S&P 500, in a taxable account. Through a separately managed account, an investment manager establishes direct ownership of individual stocks that make up the chosen index. Using technology, the manager typically includes a sample of the index constituents, which allows for close mirroring of the index’s performance. It is said by many that one of the most significant advantages of direct indexing is tax-loss harvesting, which enables investors to offset profits with losses when the stock market drops. This is when you sell an asset when its price is lower than the price you paid and use those losses to offset the gains elsewhere, lowering your tax bill. Assets under Management (AUM) under DI are set to exceed USD400 billion and TDB Insights anticipates AUM to reach USD700 billion by 2026 at a sustained 15% CAGR.

Author: Nishtha Asthana

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