Wealth managers must be smooth operators in 2025

Innovation of ideas, products and technology is key to wealth managers seeking to make sense of a highly polarised geopolitical system and deeply divided society.

As 2024 — a tumultuous year for geopolitical, trade and technological upheavals — draws to a close, it is worth looking back several decades to evaluate how societal patterns have evolved.

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Forty years ago, in 1984, we were at the height of the Cold War confrontation between two great powers of the day, the US and Soviet Union, with associated hot conflicts also playing out.

Fittingly, the song which rang out that year — in shops, cafes and bars around the world — was ‘Two Tribes’, a stark anthem in a bleak minor key, belted out by innovative Liverpudlian combo Frankie Goes to Hollywood. This highlighted intense polarisation of global political powers, industrial relations and societal viewpoints.

During that year, US president Ronald Reagan was overheard joking about bombing the Soviet Union, his key military and economic rival; tension enveloped the Middle East, as the Lebanese Hezbollah militia stepped up its kidnapping campaign; and the UK’s stark north-south divide became increasingly prevalent as the National Union of Mineworkers began a defining year-long strike.

This was the year in which Indira Gandhi, prime minister of rising power India, was assassinated by her supposedly trusted bodyguard. Similarly, paramilitaries in the Irish Republican Army attempted to wipe out UK prime minister Margaret Thatcher and her cabinet of ministers at the Conservative party conference in Brighton. They failed and Mrs Thatcher continued to dismantle the country’s famed northern industrial infrastructure, while building London into the world’s premier financial centre.

International dimension

Financial and technological Innovations, which were beginning to take on global significance, transforming society, were also prominent in 1984. London saw the launch of the FTSE index of 100 leading UK companies, increasingly acquiring an international dimension.

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In the US, the Apple Macintosh computer was launched with much fanfare, backed by a hugely impactful yet dark and dystopian advertising campaign, recalling George Orwell’s 1984 book.

But a much softer side of society was also becoming apparent during an otherwise confrontational and hedonistic decade. Society began to try and solve its own economic and political problems, through the previously unexplored medium of philanthropic giving.

This was kick-started by the release of the Band Aid single, ‘Do they know it’s Christmas?’, involving musical superstars Bob Geldof, Midge Ure and Sting, raising millions to help alleviate the Ethiopian famine. This new template has since been regularly deployed by civil and corporate society’s projects to tackle poverty, climate change and natural disasters.

Forty years later, these three key trends — philanthropic giving, technological transformation and financial innovation — are still going strong, continuing to transform society and the financial institutions operating within it, although there are ongoing challenges to confront, addressing regulation, power dynamics and their geopolitical implications.

Two tribes

After several decades of rapprochement and integration, the polarisation of ‘Two Tribes’, so familiar to those of us around in 1984, is once more defining our daily lives. Its narrative dominates politics, daily societal discourse and increasingly, investment thinking.

Leading investment voices recognise that family offices and financial firms can no longer ignore the confluence between geopolitics and markets which impacts portfolios. After Russia’s latest invasion of Ukraine in February 2022 and China’s evolving standoff with the US, commentators recognise establishment of two rival economic blocs: an investible cohort of countries dominated by the US, Europe and Japan; and an autocratic axis, including China, Russia, Iran, North Korea and some Middle Eastern allies.

Negotiating these trends requires increased collaboration between political analysts and quantitative investors seeking to make sense of geopolitical machinations and help maximise returns for investors. Family offices are currently transfixed by these events, waiting to see how the US, China, India, Europe and the Middle East will emerge from ongoing rivalries and confrontations, and which region will have the most persuasive potential.

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There are also a number of major developments which have played out against this dramatic investment backdrop, helping define the role of wealth managers into the late 2020s and beyond. We have explored these in PWM’s articles and our Tea Break videos, which have proved popular with viewers.

Rising powers

These include: the seemingly unstoppable rise of the highly-professionalised family office, as a third leg of the investment universe, complementing institutions and retail investors; the migration of portfolios to private markets, as more companies seek to raise funds outside traditional stock exchanges; and a revolution in investment thinking, propelled by a new generation of stakeholders, taking over family offices and businesses from their parents and grandparents. This involves a much keener appreciation of the precise dynamics of environmental, social and governance (ESG) investments.

But this wealth management business ecosystem is also a divided one. Behemoths dominated this battleground, until the dramatic and ugly collapse of one of their celebrated players, Credit Suisse, described in a damning report by Swiss lawmakers. This has opened the way for a new cohort of independent, boutique players to enter the fray.

Private banks are also realising they must pay more attention to increasingly wealthy and active segments of their client base, particularly that of entrepreneurial women, woefully under-represented and misunderstood by their financial advisers, despite controlling vast swathes of wealth and corporate interests.

PWM is preparing to tackle these challenges, opportunities and megatrends as we enter 2025. But what is increasingly clear is that the banking behemoths will no longer dominate the wealth management landscape with such ease and lack of effort. When we look back to 1984, it is not Frankie’s ‘Two Tribes’ anthem which sticks in the memory. A much more sophisticated soulful ballad, ‘Smooth Operator’, from songstress Sade has better stood the test of time. In 2025 and beyond, it will be the smooth operators in the wealth management sphere, with the most nuanced business models, that will make the sweetest music.

PWM will be taking a short break to recharge our journalistic and analytical batteries, with full service to be resumed on January 2 2025. We wish all of our readers a relaxing and enjoyable Christmas holiday period and an inspiring New Year!

Yuri Bender is editor in chief of PWM