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A Guide to The $128 Trillion Wealth Management Industry
August 6, 2024
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After extensive research and industry evaluation, we are pleased to present a brief outline of the modern wealth management industry, highlighting the rise of family offices and role of wealth management software.
As the original family office technology company, Masttro’s wealth management platform is built for the future and structured to meet the demands of the current and future generation of wealth owners.
Key Takeaways
Introduction
The wealth management industry has evolved over the last few decades into a $128 trillion juggernaut. At the forefront of the industry are family offices, companies established specifically to preserve and grow the wealth of the upper echelon of ultra-high-net-worth individuals (UHNWIs) that have a net worth of $50 million or higher.
Supporting these UHNWIs is a network of private banks, wealth advisors and various professional services firms that offer a broad range of services in investment and financial advisory, estate management, tax and legal advisory, succession planning and more.
In this complex time characterized by geopolitical uncertainty, shifting regulations and migration of the wealthy around the world, we are also in the midst of The Great Wealth Transfer, as an estimated $83 trillion is transferred to the next generation of wealth owners.
This younger group of Millennials and Gen-Z are hands-on in their involvement and demand intuitive wealth management software with live data access, bringing new expectations for wealth technology.
More than ever, the industry is focused on solutions that elevate the wealth owner’s ability to easily engage with their estate, while simultaneously supporting the vast industry network that has sprung up around them. The challenge is how to provide one single pane of glass overview of the estate for all parties involved.
The Why
To understand how the global wealth management industry arrived where it is today and the increasing role of family offices, we only need to focus on why the industry exists. While the primary objective might be to both preserve and accumulate assets, it’s equally about managing legacies and ensuring a smooth transition between generations.
Fifty years ago, this might have meant passing on the details of a family bank account and some shares, but today things are far more complex. UHNWIs now have more diverse portfolios with many asset types, from public stocks and bonds to an increasing number of alternative investments.
These sophisticated portfolios have created a need for powerful investment portfolio management software and wealth management software solutions like Masttro, to ensure UHNWI and family office investments can be actively managed.
The Who
The number of UHNWIs and particularly family offices has exploded over the last decade, the latter a crucial segment due to the sheer value of family office investment. Structured as Single Family Offices (SFOs), to manage the wealth of a single ultra-wealthy family, or as Multi-Family Offices (MFOs), to manage the wealth of several families through a single company, there are an estimated 15,000 - 20,000 family offices worldwide.
Top private banks and the best wealth management firms have vast assets under their management and work closely with family offices. Private banks like UBS, Morgan Stanley, Lazard and Julius Baer, along with investment and asset management firms like BlackRock, Fidelity, JP Morgan and Wells Fargo play a prominent role in the industry. The number of independent advisors and professional service firms has also multiplied, supporting everything from investments and operations to wellness and lifestyle management.
Working with the best wealth management companies along with other external parties in a global industry has created a complex ecosystem for family offices, and a challenge for family office software to consolidate multiple sources of information.
It was after experiencing these problems firsthand at a multigenerational family office that the Masttro founders set out to develop a family office software solution themselves.
The How
Wealth management operations have evolved dramatically in recent years. Just a few decades ago, wealthy individuals commonly worked with a single bank to manage all their assets, often an inherited relationship that lasted generations and involved minimal interaction and direct management.
Today’s wealth owners don’t simply seek out the best wealth management firms and are no longer fully passive UHNW investors, but form family offices to actively manage their wealth with the same strategic sophistication and engagement as how they created it.
This new approach, combined with vastly more complex portfolios, higher reporting standards and the expectation of real-time information, relies significantly on technology. Purpose-built family office software solutions like Masttro allow wealth owners transparency and visibility at every stage of financial reporting, with access anywhere via secure mobile application.
And as emerging technologies like artificial intelligence start to influence the sector, family office software becomes even more useful to both the wealth owners and the network of institutions, advisors and specialist providers they work with.
The What
To define wealth is to outline the variety of ways it is allocated across asset classes. This can be broken down into traditional assets, like bonds, equities and cash, which together make up the majority of global wealth value. And then there are alternative assets, like private equity, real estate, hedge funds as well as private credit and luxury assets like art.
While appetite to seek investment growth and hedging in the public markets is shrinking, the private markets are growing rapidly in investment opportunities, in no small part due to investment portfolio management software that increases accessibility to more investment opportunities than ever before.
All these assets are controlled privately by various institutions and companies across global markets and involve a vast amount of data, which wealth owners want real-time access to. Wealth management software like Masttro provides this access securely, with features like multi-custodian reporting, compliance integration and selective user permissioning, the latter specifically making it a powerful financial advisor software solution.
The Where
Almost half of the world’s wealthiest top 1% are located solely in the United States and Canada, with Western Europe counting for nearly a quarter of this top percentile. And with over 600,000 UHNWIs worldwide today, the needs of these individuals is shaping the evolution of the wealth management industry and nature of investment management software.
The world’s wealthy are also increasingly mobile every year. UHNWIs are no longer restricting themselves to a single location, and many family offices set up teams in financial or lifestyle-oriented locations as a second or third location. Traditional financial hubs like New York, London, Zurich and Hong Kong have been challenged by newly popular jurisdictions like Singapore and the Emirates, forcing the best wealth management firms to establish themselves in these locations.
The ongoing globalization of wealth makes it critical that both wealth management software and financial advisor software solutions work seamlessly with worldwide partners, an approach Masttro originated with when developing their family office software solution.
The When
Before the late 1970s, wealth was mostly held in bonds, equities and real estate, with investors not having easy options outside of these. In the early 1980s, the stock markets started to grow and the variety of investment products began to expand exponentially, leading to new securities, funds and the ongoing boom in alternatives.
This was the origin of the modern wealth management industry, and saw the emergence of asset managers building portfolios of UHNW clients, the best wealth management firms competing directly with banks. With this also came the need for a new range of financial advisor tools and wealth management software solutions.
Technology has played a role throughout, from the early days of electronic trading and internet trading taking off in the late 1990s, through to cloud-based wealth management and financial advisor software software solutions, which may be ubiquitous today but were unheard of when Masttro began developing theirs in 2010.
Masttro has been at the forefront of the WealthTech revolution since, releasing their original GWM and CPA modules back in 2013, a first live data feed a year later and going on to start developing artificial intelligence solutions in 2019.
With the proliferation of family offices and need for solutions to manage the transfer of wealth to the next generation, Masttro has continued to enhance its platform with the most useful features through an unwavering focus on needs of wealth owners.
Conclusion
The rise of family offices and influence of the next-generation is playing a major role in how the global wealth management industry operates, what asset classes gain popularity and even where new financial hubs emerge.
With future generations set to be more financially literate and with more access to information than any previously, we’re in a cycle that points to the continued reliance on technology and wealth management software solutions.
Wealth tech solutions that flourish will also need to cover a wider spectrum of needs, not just as a wealth management software solution for UHNWIs and family offices, but one that simultaneously provides a financial advisor software solution for the industry of advisors and professional services firms that has built up around them.
As the original family office technology company, Masttro’s wealth management platform is built for the future and structured to meet the demands of the current and future generation of wealth owners.
Masttro
Masttro was founded in 2010 as a pioneering solution to challenges that the founders faced first-hand while running a complex multigenerational family office.
From the beginning, their objective was a global family office software solution that integrated with the best wealth management companies but put the needs of the wealth owner first. Today, with headquarters in New York and offices in Switzerland and Mexico, and operations across 27 countries, Masttro services thousands of clients.
For family offices, wealth managers and advisors, as well as professional service firms, the platform provides both a comprehensive wealth management software and financial advisor software solution.
The platform can seamlessly aggregate and ingest all assets, from liquid investments to complex alternatives including real estate, private equity holdings, passion assets and more, delivering the complete picture of every corner of wealth
User experience is paramount throughout, from easy portfolio consolidation setup, intuitive dashboards, automation and custom user preferences through to seamless integration into current tech stack.
Choose Masttro and join leading businesses that have done the same to put their wealth in full view.
Or visit masttro.com to explore our full product capabilities.
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