The wealth management industry is undergoing massive change, as any financial advisor working today can attest, but the transformation may be greater than many advisors think.
A survey of 2,000 investors and 500 investment providers worldwide, conducted by the Roubini ThoughtLab, found that “many investment producers … do not appreciate just how fast these changes happen—and the profound impact they will have on their business,” said Lou Celi, chief executive of Roubini ThoughtLab. “These are hardly normal times.”
In the report, “Wealth and Asset Management 2021: Preparing for Transformative Change,” the authors describe a “convergence of technological, economic, demographic and consumer trends” globally that “will turn the wealth profession on its head by 2021, reshaping customer expectations, disrupting business models, and altering advisor roles.”
The study was produced in conjunction with several sponsors, including Bank of Montreal, Broadridge, Financial Solutions, CFA Institute, Cisco, eToro, Schroders, SEI and State Street.
The Changing Profile of Investors
By 2021 household assets will surge to $89 trillion in the top 25 global markets, with the biggest gains in emerging markets such as China and Mexico, and more than half of those assets will flow into the wealth industry, according to the report.
In North America, the majority of wealth in 2021 will be managed by women because of inheritance and their own asset accumulation, according to Amit Sahasrabudhe, Head of Wealth Management Strategy and Digital Solutions at RBC, one of 30 firms consulted for the study.
And over the next 30 to 40 years, $30 trillion in wealth assets in North America will be transferred from older generations to millennials, according to projections from the Bank of America.
With this shift comes changing expectations. More than half of investor respondents (52%) surveyed—including millennials, Gen Xers, and baby boomers—expect to expand their use of anytime, anywhere, any device access to their accounts, while close to half (43%) will desire personalized services.
How Wealth Managers Should Respond
Wealth managers need to respond to these changing customer demands or risk losing clients.
Kevin Barr, Executive Vice President of SEI Investment Management Unit, a sponsor of the study, said, “There’s no denying the monumental shift taking place in financial services technology. It’s being driven by investors and embraced by service providers who understand that the industry’s technology evolution is only speeding up.”
Close to half of investors surveyed indicated they are ready to switch from their current providers if those providers fail to meet their rising expectations. Millennials and women especially are more likely to jump ship if dissatisfied.
Adopting new technologies will be key to the staying power and success of wealth managers, and not just because of millennials and the wealth they will inherit.
While 32% of millennials expect their investment providers to use the latest digital technology, 41% of Gen Xers and 40% of boomers said they expect the same.
Technology-related issues accounted for three of the top five forces of change cited by both investors and investment managers who were surveyed.
Investors listed digital access to their accounts; investment managers listed new technology, including mobile analytics and social media. Both groups cited cybersecurity and fintech competition in the investment management industry.
“Technology may endanger many existing players. But it will also provide great opportunities to those who embrace it correctly,” said Andrew Wilson, senior vice president and head of AssetManagers Solutions EMEA at State Street.
“Across all generations, all demographics; all segments, digital and omni-channel interaction will be mandatory for our clients in the very, very short term,” said Rodolfo Castilla, global head of Wealth Management Products and Platforms at Citi Consumer Bank.