In the €350bn (£, $) Irish savings market, three tailwinds are unlocking growth opportunities for investment firms who have historically sat on the sidelines.
The next five years will be a cautious dawn for the Irish private investor and their wealth managers as recent structural and political changes, which encourage a higher savings rate, are met by an otherwise conservative investing culture, writes Stephen Sheehan, director, sales and relationship management Emea at BNY Mellon | Pershing.
The Irish financial services market is increasingly diverse. There are 2,500 regulated investment-related firms operating in the country, encompassing credit institutions, credit unions, non-life firms, and investments intermediaries. Despite this, the wealth market has traditionally been served, and is still somewhat dominated, by domestic stockbrokers.
Historically, wealth managers have focused largely on execution-only services – a model which has accounted for more than two thirds of the market by volume. This make-up is now shifting. As the market has matured, mass affluent and high net worth investors have sought greater choice in their investments. With choice has come the higher demand for more complex products with transparent cost and charges.
This is playing into the hands of more sophisticated wealth managers that can offer bespoke advisory and discretionary services to cater to the shift in how five million Irish citizens might invest for their future. Large industry players and life insurers have led the way in growing their presence accordingly.
Fundamentally, these integrated wealth management groups are very well placed to evolve and cater for the investors’ needs and a wider, sophisticated client base. Those wealth managers that wise up to the untapped potential in the market will follow suit.
Digitisation at last
The recent tech evolution of the domestic market is also pushing it forward in its quest to be a must-have market for wealth firms.
For the Irish private investor, personal relationships and high-touch service are still cherished. Client interaction either via the telephone or in-person will always be prized and although advances have been made in recent years, digitisation of client service has moved at a significantly slower pace than north America, which has long prioritised greater levels of integration and connectivity, and Europe, which has embraced open banking and digital documentation.
This pace will quicken because of covid, following the relative ease investors and their wealth managers have pivoted to online engagement and remote working. It has set in motion an expectation for more universal access to mobile stock trading, instant portfolio views and other functionality for a majority of wealth platform users.
There is now competitive tension in the Irish savings market which will help propel it to a new level, aided by a higher rate of technology adoption. Investment firms must learn from the last 12 months and invest heavily in new tech solutions to meet a digital demand, one which for the first time has come to Ireland in any systematic way.
A more tech-savvy wealth industry will open the Irish market up further to the next generation of savers, and recent changes in attitude towards investing in technology will help solidify wealth managers’ position and appeal.
Irish pensions are also due a shake-up
As the volume of discretionary saving grows, so does auto-enrolment. In Ireland, reforms are due to be introduced in 2022 in an effort to bridge the pension gap, both at a private and workplace level, caused by increasing life expectancy.
Although details have yet to be announced, life insurance companies may be the initial beneficiaries of auto-enrolment funds as a natural home for longer-term traditional savings plans, though it is estimated the broader wealth management sector will also benefit as distributor and adviser to both individuals and corporate institutions.
The Irish wealth marketplace has been changing rapidly. Consolidation has been the mainstay of the industry for the past number of years with firms developing their client solutions and focusing on value added advisory and discretionary services in response to changing client expectations and new opportunities. This brings the Irish market closer to the UK model of model portfolios and managed accounts.
Further potential for growth is reflected in increasing competition between domestic firms and interested international players because of Brexit and the need for UK providers in particular to establish an EU presence with passporting capabilities.
To achieve their goals in this increasingly dynamic market, wealth managers will need to plan how to respond to new investor demands and the broader market environment, not least in terms of their digital capabilities.
For those that get it right, Ireland’s wealth management sector is ripe for growth and opportunity.
This article was written for International Adviser by Stephen Sheehan, director, sales and relationship management Emea at BNY Mellon | Pershing.
