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Hewison Private Wealth - Insights
Hewison Insights

Learnings from the VAN Global Innovation Program

Travis Schindler
Partner & Wealth Adviser
13 Nov 2023

I recently returned from two weeks in the US, touring industry-leading technology and wealth management firms alongside 24 members of Macquarie’s Virtual Adviser Network (VAN) as a part of the VAN Global Innovation Program.

The two learning objectives were the ‘Adoption of Artificial Intelligence (AI)’ and ‘Transfer of Wealth’.

The Cognitive Supercycle

Throughout our visits to companies like Google, OpenAI, HubSpot, Cota Capital and Salesforce, a common message was that a new computing supercycle is underway. The last supercycle was the advent of the iPhone and before that, cloud computing and the internet. Now, the future of computing is cognitive – the hallmark of this era is a move beyond the mere accumulation and presentation of information and data, towards technologies that continually learn, reason, and grow more intelligent.

Global corporate IT spend grew from $3.5 trillion in 2017 to $4.5 trillion in 2022 and is on track to reach $6.4 trillion by 2027. The exponential growth in IT spending and investment is largely due to the rapid increase in computing power required for AI. Although the field of AI is nearly 70 years old, recent advancements are like nothing we have ever seen before. New computing components used for training and inference of AI algorithms are 800 times faster than general purpose computing chips. An interesting illustration of the rapid pace of advancement is happening at Nvidia, the leading global manufacturer of key computing hardware and software. The performance of Nvidia’s flagship processing chip has increased by 9x from 2020 to 2022.

AI is already embedded in our daily lives with most of us using it without even knowing it. Some examples include the use of social media, maps, facial detection and recognition, chat bots and assistants, online payments and banking.

AI’s ability to continually learn and adapt also means it will be capable of outperforming human capabilities in areas ranging from education to healthcare to cybersecurity. This cognitive supercycle introduces a new era where machines can read ultrasounds better than doctors, find anomalies in manufacturing better than the human eye, and quickly detect individuals engaged in malicious activities better than current law enforcement. In the end, we are able to achieve advancements that were previously beyond reach, ushering in a future where intelligent systems contribute significantly to the betterment of business and society.

The Transfer of Wealth

Another supercycle underway is the intergenerational transfer of wealth. Between 2002 and 2018, $1.5 trillion of wealth has passed from one generation to the next. However, this figure is estimated to grow to $3.5 trillion over the next 20 years. According to Findex’s 2022 Managing Wealth report, by 2050, Baby Boomers in Australia are set to pass on an estimated $224 billion each year in inheritances to Millennials and Gen Z. While research shows that Millennials and Gen Z feel confident about managing their money, it also shows they are spending for today, pursuing riskier investments, and most have below $79,999 in a superannuation balance despite believing they need $1 million to retire comfortably.

With this wealth transfer comes the opportunity to provide advice….

When Australians were asked for their thoughts on managing their finances, 38% are not confident in their level of understanding of how to manage their finances and 55% currently do not have any investments (e.g., superannuation, stocks, real estate, etc.). This presents an opportunity to target those who are interested in getting advice which younger generations are more inclined to do compared to older ones.

On the topic of intergenerational wealth transfer, the Australian Government’s 2021 Productivity Commission Report found that:

  • 70% of families reportedly failed to prepare for intergenerational wealth transfers, despite 67% citing succession planning and inheritance as their biggest concern.
  • 72% of wealth transfer has failed due to poor communication.
  • Share of impact investment has doubled from 20% in 2020 to 41% in 2021.
  • Baby boomer women are taking centre stage as principal clients over the next decade.
  • 30% more married women are making financial and investment decisions than 5 years ago.
  • At least 80% of millennial heirs will seek out a new financial advisor after inheriting their parents’ wealth.

To better serve the next generation of wealth, including women and diverse communities, understanding their preferences towards wealth management is key.

The next generation of wealth is willing to pay for advice but prioritises access to special vehicles – such as alternative investments and tailored lending services. The next generation also wants enhanced digital capabilities and access to their investments at any time.

Throughout the two-week program, myself and 23 other business owners and leaders on the VAN Global Innovation Program were equipped with information and discussion frameworks that encouraged us to cast our minds towards a future with enhanced AI capability. We discovered possible use cases for new technologies within our practices that are aimed at improving operations, efficiency, and the client experience. Simultaneously, we were able to strengthen our understanding of how the wealth management industry must adapt and enhance its service offering to best serve the current and future generations of wealth.