Navigating change and disruption

Exploring shifting markets and investment trends at the Morningstar Investment Conference

The annual Morningstar Investment Conference last week centred on the theme of change and disruption. Vladimir Lenin said, “There are decades where nothing happens, and there are weeks where decades happen.” After the quagmire of 2015 to 2024 when we faced a myriad of challenges and stagnation, this year’s conference was all about the shifting landscape, and the entry into a new era.

Reflecting on this new dynamic, discussions examined the ongoing transformation taking place in the financial services sector, looking at investment trends, providing practical advice, and what the role of technology is in all of these developments.

Welcoming in a new era

The event highlighted the evolving nature of both the global and local investment landscapes. The global shift towards passive investments has reshaped markets. For the first time in history, more than 50% of US assets are now held in passive strategies. In South Africa, things look quite different. The country is still very much a market investing via active managers.

More recently, we are seeing a different approach to traditional asset classes. Actively Managed ETFs, a trend that has gained momentum in the US at the expense of actively managed funds, is now starting to make its mark. Even though it is in its infancy in South Africa, with only a few AM ETFs launched, this is an area that holds potential for future growth. As this trend gains traction, it will be interesting to see how it reshapes the investment landscape.

The role of technology in financial advice

Technology is significantly changing the financial advice industry. For instance, the introduction of artificial intelligence (AI) has reshaped how advisers interact with clients. This is resulting in a more personalised and efficient service offering. Advisers can use this technology to overcome any capacity constraints they may have to focus on, delivering better client engagement.

We know that the days of one-size-fits-all advice are behind us. Today’s technology enables us to offer more tailored solutions that best meet the needs of clients.

Preparing for the next generation of investors

Another important topic touched on at the conference centred on the upcoming generational wealth transfer. The next generation of investors not only has different expectations around products and fees but is also more conscious of environmental, social, and governance (ESG) issues. In practice, most advisers do not have a differentiated strategy in place for younger investors.

However, this provides an opportunity for those who can adapt and build a value proposition that resonates with younger, tech-savvy, and socially conscious clients.

The 2024 Morningstar Investment Conference reminded us that while change can be disruptive, it is also an opportunity. As we look ahead, the role of advisers, asset managers, and investors will be to proactively shape the future of finance rather than react to it. Whether through technological innovation, adapting to new investment products, or evolving client expectations, the financial services industry must continue to evolve.

As Peter Drucker once said, “The best way to predict the future is to create it.” In this spirit, we look forward to navigating this era of change together, with the confidence that those who embrace it will emerge stronger.