Increasing your net worth begins with putting the right wealth creation strategies to work. A new report on wealth and asset management from Roubini ThoughtLab suggests that the way investors approach the improvement of their bottom lines will undergo some dramatic changes in the near future.
If you’re working on putting together a five-year plan for growing your wealth, here are some important things to keep in mind. (See also: 3 Simple Steps to Building Wealth.)
The Key Shifts Affecting Wealth Creation Strategies
The Roubini ThoughtLab study, entitled “Wealth and Asset Management 2021” revealed several findings that reflect what investors value most when it comes to wealth management. At the top of the list are:
- An increasing focus on tech-based solutions – According to the study, 82% of respondents said it was important for their investment provider to have digital capabilities. Fifty-seven percent said having on-demand digital access to their investment accounts was important to them and it was especially so among Millennial investors. (Read: How Millennials Use Tech & Social Media to Invest.)
- Stronger demand for customized services – Aside from preferring a financial advisor with hi-tech capabilities, investors overwhelmingly want the advice they’re getting to be tailored to their individual situation. Sixty-eight percent of study participants said they place a high priority on customized solutions.
- A desire for a wider variety of investment options – While they’re at it, investors are also interested in expanding their investment choices. Sixty-four percent said that offering a broader selection of investments to choose from ranked high on their list of must-have qualities in a financial advisor. (For more, see: Do You Need a Financial Advisor?)
- The need for enhanced cybersecurity measures – Hackers can pose a substantial threat to your financial well-being and digital security company Gemalto estimates that more than one billion data records were lost or stolen in 2014. In the Roubini study, 63% of investors said cybersecurity was a primary concern. (Watch: Why Is Cybersecurity So Important for Investors & Advisors?)
- Professional investment certification on the part of advisors – The study also shows that investors aren’t willing to trust just anyone with their money. Seventy-two percent of those polled said that an advisor’s credentials played a role in determining whether to use his or her services.
- Reasonable fees – Sixty-one percent of investors in the study said they based their choice of financial advisor in part on the fees charged. That trend is echoed by a 2015 Morningstar study, which found that investors are increasingly seeking lower cost funds.
4 Essential Moves to Grow Your Wealth
Roubini ThoughtLab predicts that these and other emerging trends will transform the wealth management industry through 2021 and beyond. The question for investors is, what should they be most concerned with as they work on expanding their assets and growing their personal wealth?
These strategies can help you get closer to your goal.
1. Be as specific as possible about your intentions. Building wealth is a good goal to have, but it’s also very broad. If you plan to work with a wealth manager, you need to drill down and examine your end game on a granular level. Instead of saying you want a higher net worth, for example, decide on a specific dollar amount that you’d like to increase it by over the next five years. (Read: Goal-Based Investing: A Strategy Everyone Should Know.)
2. Determine what’s most important to you. The investors included in the Roubini ThoughtLab study had varying opinions about what was most valuable to them from a wealth management perspective. If you have a financial advisor or you’re thinking of hiring one, think carefully about what you want from the relationship in terms of services, investment options and cost to make sure the one you choose is a good match. (See also: How to Select a Financial Advisor.)
3. Scale back on high-fee investments. Investment fees can be extremely detrimental to your wealth-building efforts over time. A Personal Capital white paper found that over a 30-year period, an investor could pay anywhere from $502,407 to $936,390 in fees to his or her brokerage. That’s something you simply can’t afford to do if you’re trying to create wealth. Being diligent about weeding out investments that are costing you a lot without providing a sizable return can keep you from throwing money away unnecessarily.
4. Consider your diversification level. A diversified portfolio of investments can help to minimize the amount of risk you take on. Holding something like real estate alongside investments in stocks and bonds, for example, is a good way to insulate yourself against market volatility. Wealth managers are set to feel more pressure to offer clients a greater number of investment choices over the next five years. Now is a good time to take a glance at what’s in your portfolio to make sure it’s optimized for wealth creation. Look beyond stocks and into the possibilities that real estate, private equity and other alternatives may hold. The Top Alternative Investments for 2016 lists some avenues to explore.
The Bottom Line
Wealth creation is an ongoing process. Unless you win the lottery or suddenly come into a large inheritance, it can’t be rushed. Examining the investing trends mentioned earlier can provide you with a starting point when you’re ready to update your wealth-building strategy. Just remember to keep your own risk tolerance and long-term vision at the forefront.