Each month, Mercer brings together in-house subject matter experts, employee advocates and external thought leaders for an online discussion of the most pressing issues. The program is called #MercerChats and takes place entirely on Twitter, where individuals around the world engage with Mercer’s intellectual capital and other leading thought leadership to share insights and discuss solutions to help organizations thrive. Below is a summary of our July 2021 tweet chat, highlighting some of the key themes discussed and insights shared.
If I could honestly tell you what the future of the investment industry holds, I’d be sitting on a beach somewhere on my own private island. The world is full of inflation oracles and stock whisperers who profess to know where the markets are headed, but I’ll be the first to tell you that I’m no fortune teller. What I am, however, is deeply curious about the state of the investment industry, the latest innovations remaking the world around us, and the broader forces that impact how we save, invest and retire.
As it happens, this is a fortuitous time to be interested in the global economy, as we appear to be at a profound, transformational moment. Between 18+ months of a global pandemic, the rapid integration of AI and new fintech, the rise of new economic players, and the widespread recognition of climate risk, the global investments industry seems to be advancing and evolving faster than any one individual could possibly keep track.
Amid all this change, I wanted a fuller picture of how the investment landscape is evolving, what is really transforming the industry, and where opportunity may lie in the months and years ahead. To bring you some of these insights, we invited the world’s most prominent thought leaders to our #MercerChats tweet chat series to share their perspectives. Below are some of the highlights from our conversation.
There’s a great quote from Greek philosopher Heraclitus that no one steps in the same river twice because the river is constantly changing, and it comes to mind every time I think about the state of the global economy. Even the most basic building blocks like investors are always changing, as Courtney McQuade shared during our conversation, and these demographic shifts naturally lead to new risk tolerances and exposures that render yesterday’s rulebook entirely out of date. Across the investment landscape, there are myriad factors that force investors to think differently about risk, said Jo Holden, and even then they need to remain aware of all the unforeseen challenges that may come down the pike.
To thrive in this new framework, investment professionals and wealth managers need to rethink both their investment strategies and their client engagement models. To start, Emily Chasan pointed out that investors have become more focused on resiliency than ever. At the same time, many wealth managers have recognized that tighter markets and greater transparency require them to rethink their fee models to increase value, per April Rudin, rather than relying on investment returns alone. A new risk landscape may require a whole new approach, but in some cases that may not always be a bad thing.
Be more aware of the massive systemic risks and fragile underpinnings. Baby boomers are turning 70 in record numbers ...they don't have the risk tolerance they had in their 50's.
Dramatic swings in markets reinforce the need that its time to think differently about risk. Be aware of models that suggest all tends to be well on average; all is not well when you are forced to disinvest at the wrong time.
There's been a generational shift in work, retirement, expectations & goals about the role of employers, family and government. The future will not be like the past. Investors that learned to focus on resiliency will continue to be rewarded in the future.
Global systemic risks will increase the pressure on financial advisors to justify the wealth management fees that they charge and provide more value-added services rather than relying on investment returns alone.
On its own, a global economic shutdown amid a viral pandemic would be enough to send even the most brilliant investment minds spinning. But in reality, things are further complicated by the ongoing emergence and adoption of new fin tech, investment tools and other innovations that are transforming the global investment landscape on the fly. From crytocurrency to blockchain to the stunning rise of consumer/meme investors, new technologies are sending tsunami-sized ripples through the global economy.
What’s most interesting, though, is how and where this new tech is being brought to bear. Damien Davis noted that one of fin tech’s greatest potentials is in how it can change individual investors’ interactions with their investments, and Martyn James observed how these solutions are making an even greater impact via increased financial education, personal financial assessments and new personalized products. But the real potential of fin tech is massive, as we’ve seen how the democratization of instant trading can shake up stock markets and challenge the status quo. What’s more, as cryptocurrencies continue to gain ground, as Ian Horne shared, more barriers to investment are removed and new asset classes emerge.
Fintech solutions are being launched in LatAm to provide individuals with Financial Education, personal financial assessments and to provide solutions/products to help improve.
While Fintech is really going to help change how individuals interact with their investments. The big wins here will likely be cost and customisation.
Blockchain + crypto are exciting as they democratize wealth and investing. We can unitise investments and remove barriers to certain asset classes. But... the drawbacks are obvious. People are investing in cryptos, that don’t have real world applications.
Of all the trends that were discussed during our conversation, climate change and sustainability loomed largest. That’s because, as Julius Bendikas put it, sustainability is now at the epicenter of institutional investors’ decision-making process. No longer a niche business area or glorified PR initiative, climate-conscious investing is becoming the norm at even the most traditional investment firms.
Against the backdrop of portfolio de-risking and the search for future-resilient investment opportunities, this surge in interest should come as no surprise. Climate change represents a major risk, as Theodora Lau noted, and more investors are facing demands for transparency on climate-related risks within their holdings. Looking forward, the growing appetite for sustainable investments will continue to drive change in the investment industry, as leaders delve deeper into this fast-growing focus area and affect the real change the Tess Page called for. Far from an investment trend, sustainability looks to be a bedrock consideration for global investors for the foreseeable future.
Sustainability is at the epicentre of institutional decision making as investors look to decarbonize their portfolios and commit to transition pathways. Asset owners can have a huge impact on climate change by incentivizing corporate change.
The climate crisis poses a major risk to the stability of our financial system. Demand for disclosure of information on climate-relevant financial risks will continue to grow, along with appetite on green or sustainable investments.
After years of languishing as a “special interest area”, sustainability is having its Cinderella moment. BUT there is a clear need to carefully sort true sustainable leaders from green-washers, with a clear frameworks.