Wealth Trends to Watch
Wealth management businesses are recognized for their consistency in investment performance, acquiring and retaining top talent, and operations. However, Investors are now seeking lower costs, better value for their money, and personalized solutions that align with their changing individual needs. Consequently, wealth managers are faced with the imperative to reform their approaches to avoid potential disruption, irrelevance, or failure.
To address the evolving landscape, wealth managers should evaluate key trends and factors when deciding where and how to invest client money. Most wealth management studies report that the top three business priorities for 2024 are client experience, expanded services, and M&A activity.
Client Experience
These goals make sense considering the large wealth transfer that is already taking place, with $72.6 trillion in assets estimated to pass from baby boomers to millennials by 2045. Recognizing the scale of this transfer and strategically addressing the changing needs of the inheriting generation is essential for wealth managers.
This next generation of investors behaves differently and has a new set of expectations, which is why 80% of millennial heirs will seek a new advisor once they’ve inherited their parents’ fortune, with digital and mobile convenience being a major factor in their decision, according to Capegemini, a French multinational consulting company.
Success in today’s wealth management industry is linked to seamless, convenient, and personalized digital client experiences. This is often easier said than done when the new customer onboarding process is overburdened with paperwork. Overcoming this challenge, maintaining consistency across lifecycle stages, and embracing technology are pivotal strategies for delivering client-centric and efficient wealth management services in today’s dynamic market.
Expanded Offerings
The evolving demands of a new class of investors underscores the imperative for wealth managers to enhance their digital experiences for core services. Additionally, wealth managers need to broaden the scope of overall services beyond traditional investment advice.
Wealth managers have numerous opportunities to offer value to the relationship through estate planning, retirement planning, tax advice, loan and credit management, life insurance, and health planning.
Another valuable opportunity lies in retirement planning, as 63% of affluent investors cite saving for retirement as key to their financial goals, according to “Unlocking the Mindset of Today’s Affluent Investor,” a research report by Envestnet and The Center for Generational Kinetics.
As wealth managers expand their service offerings, they must invest in technology and digital experiences that can scale seamlessly across multiple aspects of their business to provide consistent experiences for their clients.
On the Move
The movement of advisors and wealth management firms can have implications for client relationships. Clients may experience changes in service models, communication styles, and the range of available offerings based on the decisions made by their advisors and the firms they align with.
Advisors are rapidly leaving established wirehouses to pursue the independent channel, more RIAs are consolidating through M&A activity, and veteran advisors are retiring or departing the business in large numbers.
Many of today’s advisors seek more autonomy in their operations and consider the independent channel as an appealing option. According to a new Fidelity survey, nearly 17% of advisors have left wirehouse firms to work independently in the last five years. This trend is expected to continue, as 69% of respondents to a recent Arizent study anticipate more advisors switching to an independent approach.
Simultaneously, registered independent advisors (RIAs) are merging at a quick pace to decrease costs, gain economies of scale, and maximize their talent pools and services. Over the past three years, asset and wealth management merger volume has remained steady at an average of more than 300 deals per year, peaking at a historic high of 316 deals in 2022, according to data from professional services network, PwC.
Modernize your Practice
In navigating the dynamic environment of wealth and asset management, businesses are encouraged to adapt to the preferences of tech-savvy investors, facilitate the swift movement of assets, and strategically invest in technologies that enhance procedures and client experiences. By staying attuned to market shifts and embracing innovation, firms can position themselves for sustained success.
