Sustainability in Economics and Finance

The Rise of WealthTech and Sustainable Finance: Trends in Asset and Wealth Management

11/October/2024

As we move further into 2024, the financial world is seeing big changes, especially in asset and wealth management (basically, how companies handle and grow large amounts of money for people and organizations). Larger companies are joining forces, new technologies are being introduced, and sustainable finance (which is about making investments that are good for the planet and society) is becoming a hot topic. In this section, we’ll look at some of the most important trends, like the rise of WealthTech and the growing focus on ESG investing (which stands for Environmental, Social, and Governance – things that make businesses more ethical and responsible).

Mergers and Acquisitions (M&A): Big Companies Getting Bigger

One of the major trends in asset and wealth management is mergers and acquisitions (M&A). This means that bigger companies are taking over smaller ones to grow even larger. Right now, Europe is seeing a lot of this, where bigger companies are swallowing up their smaller competitors to expand their reach. This is called the “barbell effect”, big players dominate the market while smaller ones struggle to survive.

For example, in the UK and France, companies like LGT have bought up smaller firms like Abrdn Capital. This allows the bigger companies to manage more money and clients, but it also leaves fewer opportunities for smaller, independent companies to compete. In simple terms, the rich are getting richer in the world of finance.

The Rise of WealthTech: Technology Shakes Up the Finance World

While big companies are merging, another trend is changing the game: WealthTech. This is a fancy term for technology-driven solutions that make managing money easier. Think of apps or software that help you invest, manage your wealth, or track your financial goals. These technologies are becoming more popular because they offer more personalized and efficient ways for people to handle their money.

For example, companies like Kenzi Wealth are using tech to offer better services, and big players like EFG Hermes are buying stakes in these companies to stay competitive. Simply put, WealthTech is making it easier and faster for people to manage their investments, using the power of technology to improve the process.

Sustainable Finance: ESG and Responsible Investing

Another big trend is sustainable finance, particularly something called ESG investing. ESG stands for Environmental, Social, and Governance, and it's about investing in companies that do good things for the environment, treat people fairly, and follow ethical business practices. However, there has been a recent dip in the number of new ESG funds (which are pools of money specifically invested in responsible companies). In the second half of 2023, only six new ESG-focused funds were launched in the UK, compared to 55 earlier in the year.

While this drop might seem like bad news for sustainable finance, it doesn’t mean people are losing interest. In fact, companies are still using ESG principles in their investments, but they’re being more selective about it. So, even though fewer new funds are popping up, sustainable finance is still very much alive and kicking. It’s just evolving.

What Does This Mean for the Future?

So, what’s the takeaway from all these changes? The future of asset and wealth management is heading towards a mix of big companies getting bigger, technology making things easier, and more attention being paid to sustainable and responsible investing.

For students like me, this is exciting because it shows how technology and sustainability are becoming important parts of finance. It’s not just about making money anymore—people want to know that their investments are doing good for the world, too. And with the rise of WealthTech, managing finances might become as easy as using your favorite app on your phone.

Final Thoughts

The world of finance is changing quickly. From the rise of WealthTech to the growing importance of sustainable finance, it’s clear that technology and ethics are shaping the future. For students interested in finance, like us, keeping up with these trends is key to understanding where the industry is headed.

Whether you’re into finance or just curious about what’s going on, these changes are worth watching. As the industry moves forward, technology and sustainability aren’t just trends, they’re the future.