Ranks of these investors are poised for fast growth in coming decade

On Feb 17, 2022

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The U.S. wealth management industry is poised to grow by about 5% annually over the next five years, while certain segments of the investor population are positioned to see the biggest boost, according to a new report from McKinsey & Company.

Three investor subgroups, in particular, are showing signs of “significant and lasting growth,” the report found.

This includes women, new investors who opened brokerage accounts for the first time during the Covid-19 pandemic and hybrid affluent investors who are working both with traditional financial advisors and self-directed accounts.

That’s as 2021 was a mixed year for the U.S. wealth management industry overall, with record-high client assets of $38 trillion but the slowest two-year revenue growth since 2010, at a rate of 1%.

“While we would say the industry has been resilient, we would also say it’s not been unscathed,” said Jill Zucker, a senior partner at McKinsey and one of the authors of the report.

“Really, the message for wealth managers is this is certainly not a moment to be complacent,” she said.

Women to take ‘center stage’

Women already control about 33% of investable assets — or $12 trillion — in the U.S.

And that is poised to increase over the next decade, with baby boomer males expected to die and leave money to their female spouses, who are often younger and have longer life expectancies.

By 2030, it is expected that American women will control much of the $30 trillion in investable assets owned by baby boomers.

Younger affluent women are also poised for growth as they increasingly take interest in their finances. About 30% more married women are making financial and investment decisions compared to five years ago, McKinsey noted.

While women tend to lack confidence with regard to investments decisions, they do not lack competence, Zucker noted.

It will be important for financial advisors to anticipate their different needs, such as emphasizing the well-being of the family over investment performance.

“Women are looking for something slightly different from their relationship with their wealth management institution,” Zucker said.

Active traders to continue to grow

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More than 25 million new direct brokerage accounts have been opened since the beginning of 2020. Many of those new accounts are owned by first-time investors, as Americans were able to save more money during the pandemic.

The adoption has been fueled by developments in the financial industry, including the elimination of online brokerage commissions and increased access to fractional shares.

The high rate of growth amid the pandemic might not be here to stay. But there still will be accelerated expansion in the next 10 years, according to McKinsey, in part due to the low median age of 35 for these engaged…