Wealth management trends and directions

Wealth management trends and directions

Disruptors have significantly impacted the financial realities of most countries in recent years. High inflation and frequent interest rate hikes threaten both businesses and individuals. Financial companies may position themselves as safe investments for customers to combat inflation and ensure stability.

Factors such as fee compression, wealth transfer, and hybrid work have substantially transformed the financial landscape.

In such a climate, financial service providers should innovate to expand their businesses. Wealth management companies can use recent market changes to improve their business strategies. They should not perceive these changes negatively.

WealthTech and the digital revolution

New technologies are revolutionizing all sectors in most industries. In wealth management, new digital tools are helping advisors streamline their work. A younger generation of professionals now expect to implement and use these tools throughout the entire wealth management process.

Client expectations to customize products and services are also increasing. Half of high-net-worth individuals want their wealth managers to expand their digital offerings. Discount brokers are a great low-cost option for small investors. They offer similar services as full-service brokerage firms do, charging $5 to $15 per transaction. Some online brokers even provide commission-free trades.

Cloud-based infrastructure is more widespread than ever before. Financial service providers have adopted many of these products because of their flexibility and lower costs. In the future, this may lead to a migration away from physical hardware.

The downside is that digital transformation brings with it new cybersecurity threats. Companies that want to differentiate themselves from the competition in terms of cybersecurity should opt for SOC 2-certified wealth management platforms.

Direct indexing is also gaining popularity. The market for direct indexing has increased from $462 billion in Q1 2022 to $800 billion in 2026. Client demand for more independence and customization is pushing this forward.

Goliath wealth transfers and demographic shifts

Baby boomers are gradually passing their estates to their children, resulting in $15 to $84 trillion in wealth transfers. As more tech-savvy generations take over, financial service providers must tailor their offerings accordingly.

Younger people are more interested in one-stop wealth planning services to achieve greater financial independence. They prefer a goal-based approach to asset management and comprehensive plans. Some 70% of clients consider hyper-personalization an essential factor when selecting an advisor.

Women investors have caused a significant shift in the wealth management landscape by controlling a considerable portion of household assets, approximating $12 trillion. They tend to have longer-term investment objectives and are more mission-oriented than men. Wealth management professionals must cater to their unique needs, goals, and investment preferences.

Despite changing demographics and the resulting new demands, modern technology can help advisors meet the call for more personalized and autonomous services. Leading wealth management firms understand the potential benefits of leveraging AI and the data provided by FinTech tools. By doing this, they can understand their clients better and offer customized services that meet their needs.

These expectations do not necessarily mean an increased workload for wealth management professionals. On the contrary, reducing their workload through AI or other FinTech tools has become the new reality. As the demand for digital solutions increases, greater integration of these tools will also help clients manage their assets more independently.

Yet wealth management professionals are not going anywhere. Younger generations still need financial education to understand how to properly manage their investments using new technologies.

Wealth management professionals will increasingly become “expert educators,” providing clients with knowledge and methods to decentralize wealth management while offering customizable services through hybridized online platforms and in-person services.

Cryptocurrency going strong

Many investors include cryptocurrency in their portfolios, even though some are cautious because of its volatility. Indeed, 50% of high net-worth investors report owning cryptocurrency. Wealth management leaders, such as J.P. Morgan, have begun offering Bitcoin-based funds.

Spot Bitcoin ETFs have gained popularity due to their convenience and accessibility. They also allow investors to gain exposure to Bitcoin without direct ownership. These ETFs provide a familiar investment package for institutions and investors, mitigating concerns around custody and security. Additionally, the approval of spot Bitcoin ETFs by regulatory bodies has signaled increasing acceptance and integration of cryptocurrencies into traditional finance markets.

Digital asset management still faces barriers. Given the regulatory gaps, some advisors still see it as an unacceptable level of risk.

Delivering digital assets to clients securely and conveniently also requires a new digital infrastructure. Wealth management professionals must also educate their clients who have little information about cryptocurrencies. Despite these issues, digital currencies have grown too much to ignore.

Advisor shortages and new business models

Estimates suggest that nearly 40% of financial advisors will retire in the coming decade. If firms want to maintain their current number of advisors, they need to significantly increase their recruitment efforts. Since 2020, more than 25 million new direct brokerage accounts have been established primarily by new investors. Soaring demand coupled with mass retirement will challenge firms that cannot recruit fast enough.

Using advanced WealthTechs and AI can serve as an efficient contingency plan. It enables advisors to concentrate on client-centered activities and meet the preferences of newer generations of investors.

Some firms may opt to outsource certain administrative tasks that are considered mundane. Wealth management professionals can then focus on customer service and investment management.

In addition, more and more financial advisors are choosing to work independently as registered investment advisors (RIAs). The number of independent RIAs rose by 8% in the last decade. This is primarily due to the increased accessibility and improved performance of wealth technology instruments.

This migration poses a serious threat to wealth management firms. They must therefore begin to deploy massive recruitment efforts and develop innovative strategies to retain their existing workforce.

Innovating in a time of disruption

The COVID-19 pandemic forced businesses in almost all industries to revise client strategies and develop more resilient business models. The recent years have also hastened the global widespread acceptance of digitalization. The pandemic pushed many businesses to use more technology and permanently changed how they operate.

This is apparent in the wealth management space, with 85% of firms prioritizing the expansion of their digital offerings. The latest generation of WealthTech tools can provide these firms with fully customizable and scalable solutions.

Such solutions are well-suited to the current realities of the wealth management industry. They are easy to implement and can streamline, improve, and automate the delivery of financial services. FinTech solutions can also address the shortage of advisors and adapt to the preferences of younger generations of investors.

Despite these challenges, experts predict a net growth in the wealth management industry in the coming years. Digital financial services will play a key role in driving this growth.


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