The Changing Paradigm Of Wealth Management Best Practices


Young Upstarts

April 14, 2014



The new generation of wealth managers is looking towards purpose in addition to profit – a clear indication of a changing paradigm in the wake of a widespread structural shift in wealth, also recently highlighted at the World Economic Forum.


According to their report, a wealth transfer of $41tn is going to take place from baby boomers to millennials in the coming decades, depicting a change in the management of wealth and calling for best practices to be reformed before implementation. The new wave of investment is shaped on the generational shifts in money, ideologies and manpower.


And the new idea is to blend profit and purpose.

Tracing best practices

Tracing existing best practices of wealth managers, including the three mentioned below, gives an insight on current investment trends, technology reshaping investment decisions, etc.


  1. Clean technology portfolios.

Wealth managers should look at how high-net worth clients are behaving in the market, and their preferred areas. During the last few years, the high-net worth clientele has shifted towards clean energy projects that are principled on Mosaic’s technology enabled investment platform. Mosaic had a healthy return last year, outperforming the U.S. treasuries.


Another good example is that of Black Coral Capital, moving investments to reshape the clean technology market. Companies such as Next Step Living, Clean Energy Collective and Digital Lumens have been added to their portfolio, encompasing a best practice built around purpose and profit.


  1. Business Intelligence.

An out-of-the-box market best practice for wealth managers is to create business intelligence. “If you have high net worth clients who need holistic advice, pursue CPWA certification,” urges a member of the IMCA financial planners association. This advice makes sense on the grounds that such a certification leads to a regulated lifecycle of wealth.


Also, managers who are able to attain such certifications are able to identify the challenges faced by high-net-worth clients, and in response develop strategies to protect assets, reduce taxes and transfer wealth.


  1. Making impact investments.

A key best practice is to invest smart, and more appropriately, make ‘impact investments’ that would do a world of good for the wealth manager’s portfolio. Impact investments involve investing with the intention to generate both finance returns and also a purposeful, measurable environmental impact.


A report compiled by Sonen Capital reaffirms that areas of sustainable growth have allowed organizations to do well as compared to the generic wealth managers. The report focused on the success story of KL Felicitas Foundation that shifted its assets to impact investments over a period of seven years.  One key benefit of such an approach was that the portfolio volatility was decreased and market inefficiencies were addressed through capitalization of social trends.

Practicality of best practices

The three-tiered best practice approach described above has allowed wealth managers to gain unprecedented profits and reputation through purpose.


Significant examples can be seen with the case of Capricorn Investment Group; the corporation shifted investments towards SolarCity, a renewable energy project from Elon Musk. The reward for Capricorn is that SolarCity has experienced a 400% increase in stock price in the last 12 months.


The idea is that with an impending wealth transfer, management groups should educate themselves and their HR on the new generation of investment avenues. Because investments should not merely generate positive returns; they should also have a positive impact.


By understanding these new paradigms, it is possible for budding entrepreneurs and wealth management enterprises to make financially sound decisions.


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