Wells Fargo Asset Management
Major socioeconomic forces are changing how we all save and invest—how we think about money, how we make financial decisions, and even our expectations for the future.
- Demographic changes: A massive transfer of wealth is shifting investable assets to women and millennials.
- Increasing longevity: The cost of retirement continues to rise for individuals and employers, along with a looming crisis of a retirement income shortfall.
- Lower-return environment: Investors face lower expected returns overall, with greater need for diversified returns, lower costs, and better risk management.
- Information technology: Investors are exposed to so much real-time information that it can be difficult to distinguish true insights from noise.
- Rising rates: After a decade of ultra-low interest rates, institutional investors will need to manage long-dated obligations through a rising-rate environment.
How should investors address these challenges, and where are the opportunities? What tools and information do they need, and how can we support the successes of our clients? As we seek to understand and solve for the needs of our clients, we recognise that all investors share the following three investment goals:
Build for successful outcomes by targeting efficient exposure; Defend portfolios against losses by harnessing investment risk; Create long-term financial well-being by aiming for sustainability.
Each of these goals is distinct in how it applies to our asset management approach, but all three are connected by a common purpose of focusing on the key challenges facing investors.
- Build for successful outcomes by targeting efficient exposure
Assets are more than just numbers on a spreadsheet. It’s what these assets represent that matters—securing a retirement plan, paying down debt, funding causes we care about—as we build the life we want to live. The same is true for investing. Ultimately, it is about meeting financial goals, not beating a benchmark.
Our asset management approach is rooted in this principle of building solutions for successful outcomes for investors. That takes a deep understanding of the components that drive returns, mitigate risk, and influence cost in order to grow assets, preserve wealth, or generate income.
- Defend portfolios against losses by harnessing investment risk
Risk is not about standard deviation or correlation or any other quantitative measure.
Risk is personal—it is the uncertainty over whether an investor will be able to meet their goals—whether a loss will prevent them from buying a house, launching a new business, or funding retirement benefits.
Risk is directly connected to building successful outcomes because the real risk is the possibility of not achieving those goals.
- Create long-term financial well-being by aiming for sustainability
Investors’ definition of prosperity has changed. It is longer term, more inclusive, and more goal-oriented. The way that investors measure success is also more informed. It is often around well-being and engagement. It is about achieving a higher level of satisfaction and having an impact, financially and purposefully.
Financially: As retirement years increase, so does the burden of funding. Investors are looking to employers and advisors to help them to understand how much they should save and how they should invest.
Purposefully: At the same time, investors are more aware of how they use their financial capital and of the potential to achieve strong returns along with a positive impact.