The world has become a different place since mankind has been confronted with the coronavirus SARS-CoV-2. On a global scale, people’s everyday life is subject to massive changes of a kind never seen since the days of the Spanish flu a good 100 years ago. Almost all areas of life are strongly influenced by the effects of the pandemic or the containment measures taken to deal with it. This also applies to the way people and institutions deal with the topic of investing.

However, it would be too short-sighted to reduce the changes affecting this area to the factor “pandemic” alone. Rather, as in many other sectors, the thesis applies here as well that the pressure on financial service providers to redesign their business model has not been high enough as of today.

Different perspectives are needed to analyse the processes surrounding investing and the changing client needs. On the one hand, the behaviour of market participants is relevant: Product providers, banks and asset managers react differently to this change. However, new customer demands and criteria also lead to requirements that are not all covered by the existing service providers and their service portfolios. In the following, we show how client behaviour is changing, how service providers can react to this and how the competition as a whole, including market participants from other sectors, sorts itself.

1. Clients

Since the outbreak of the Corona Pandemic, people and institutions have been faced with new challenges as investors. In the area of conflict between a vast amount of data available in real time, which is multiplied even more by social media, and an overall increased need for reliable information, questions about one’s own life situation and one’s own (financial) goals and wishes are becoming more central.

Many investors have used the lockdown period to reflect on these issues. As a result, many financial service providers were able to report an increase in demand for advisory services during this period, and quite a few of them also reported a significant increase in transactions executed, with corresponding positive effects on commission income, e.g. in the securities business. However, not only the supposed pioneers of digitalisation such as neo-banks and neo-brokers were the winners, but also many institutions active in traditional consulting.

In addition to these highly operational circumstances as a direct consequence of the Corona crisis, longer-term trends also influence the behaviour of private (and institutional) investors. The desire for a holistic approach that takes into account the goals and wishes of a client, but also completely understands a client’s own asset situation and derives and implements the appropriate investment strategy without forgetting a client’s value and investment ideas, is being demanded by an ever-increasing number of clients. Corresponding studies by EY and CapGemini (see sources below) show that a large number of clients would also change providers for such advice, especially when special life events are pending, such as a change of job, starting a family or the sale of a company. This is true across all customer segments from retail to affluent to HNWIs or UHNWIs.

An essential aspect in this context is the question of a client’s preferences. Understanding and implementing these across the board requires more than a MIFID II-compliant questionnaire.

Questions about sustainability are crucial components of a client’s appropriate profiling and should go beyond pure regulation:

  • What is a client’s position on the issues summarised under the terms Environmental, Social and Governance (ESG)?
  • Are there possibly even different views on the individual issues within the ESG context?
  • Does a client want to achieve an actual effect with his investment, keyword impact investing?

Of course, this context also includes the question of general investment preferences:

  • Active vs. passive
  • Big Player vs. Investment Boutique
  • Quantitative vs. qualitative investment process
  • Etc.

Many of these issues can be summarised under the trend of increasing individualisation of products and services. Anyone who can flexibly configure and “design” cars or sneakers on the Internet today will probably have little use for an off-the-shelf investment strategy.

2. Service Providers

While the Corona crisis has shifted the patterns of action and needs of clients, financial service providers such as banks, insurance companies and asset managers have been forced to react quickly and flexibly to these changes. This was an immense challenge for some market participants, as the sharp rise in private wealth in recent years and the associated comfortable earnings situation meant that the pressure to implement structural adjustments in the business model was, on balance, rather low for wealth managers and asset managers.

Nevertheless, Corona will not allow us to repeat the growth figures of the past, because regardless of the asset growth in some client groups, many people are also dependent on their savings and investments to compensate for loss of income. In addition, it will be difficult to repeat a second Corona year in terms of transaction density. Furthermore, negative interest rates are exerting ever greater pressure on profitability, as more and more investment regions and currencies are in negative interest terrain, at least in the short term and making the sometimes high cash holdings of clients expensive for the financial institutions.

Naturally, the first measure in such situations is the focus on costs. Here, banks and asset managers should look at their structures and critically examine to what extent their competitiveness could be impaired by their “spending behaviour”; cost-intensive legacy IT systems, locally oversized sales units, inefficient product ranges certainly play a role here. The pandemic will therefore become a catalyst for possibly difficult decisions, but also an accelerator of meaningful, structurally necessary adjustments which can ensure long-term sustainability.

Directly related to this is the revenue side; fee and pricing models need to be adapted to the changed market structures, which were already under dynamic movement and put pressure on margins even before the outbreak of the pandemic. The traditional regime of percentage-based remuneration of asset values is under discussion, which many clients feel is no longer up to date or, in view of available alternatives (e.g. Robo-Advice), simply too expensive. Alternative models such as fee-based or performance-based remuneration are becoming increasingly interesting for providers, because advising clients on investing in combination with the right tools can activate the potential to grow faster than the market through competitive advantages.

In the future, simpler and easier accessible interactions between clients and financial service providers will be required. A service provider can respond to the trend of hyper-individualisation by offering truly personalised advice and information and will strengthen the client relationship with it. The information advantage thus gained over competitors is central in this respect, because this allows to access significant upselling potential by addressing and accompanying the customer in a targeted, individual manner.

In this context, the advisory processes and tools must also be subjected to a critical review: More holistic, goal-based advice and optimisation instead of product-oriented sales of single solutions, which often only appear to be individually oriented. At best this is embedded in a multi-channel concept of advice and support on site, via electronic media or completely online via self-explanatory client journeys on the website of a provider.

3. Competition

As in many other areas, the competitive situation in wealth management and private banking has changed massively and is now much more diverse than it was a few years ago.

While banks and asset managers once had to struggle with the newly established online brokers such as Comdirekt or Consors, these are now themselves being disrupted again by newer providers from the fintech and wealthtech area and are fighting with neo-banks and neo-brokers for lucrative assets. Additionally, providers of multibanking apps for current accounts and payment transactions do appear on this field of action, as, thanks to their detailed knowledge of the purchasing behaviour of their users, they are able to offer tailor-made solutions in the investment and savings sector. Furthermore, asset managers are increasingly targeting at least wealthy clients directly and can detour other external sales channels (cut out the middle man) with direct and attractively designed services.

Finally, the activities of the so-called Big Techs should not be underestimated. Their users are highly willing to take advantage of new offers, and the companies are increasing their activities on the client side of the financial market in order to achieve the high margin growth that is still required beyond their traditional business. The recent relaunch of Google Finance can serve as an example here, even if some interpret it just as an experiment.


“The width at the top has become denser” (orig.: Die Breite in der Spitze ist dichter geworden) was once stated by Berti Vogts. This also applies to the topics of investing. Private investors today have the choice between a variety of providers, who offer a variety of access routes and present their services in a variety of granularity.

For established suppliers, this environment also offers opportunities for growth and to stand up to the increasingly demanding competitive environment. The decisive factor will be in the differentiation in client care. Those who have modern and flexible models such as hybrid advice and multi-channel offerings, which offer customers simple and attractive access options, will benefit rather than suffer from the change described above.

In the end, the winners of this “race” will be those organisations which are best able to understand the customer and his needs as a whole and tailor offers. True holistic advice, taking into account all assets, including those not only held by the entity, current financial obligations and retirement income, goals and life events, finally turns the traditional wealth manager into the “trusted advisor” that all wealth managers strive for.



CapGemini World Wealth Report 2020
BCG Global Wealth 2020 – The future of wealth management
EY 2019 German Wealth Management Report