The top 10 wealth management trends that Aite Group sees for 2019 aren’t shocking, and in fact the firm itself sees them as “revisiting the value chain.” In a presentation, several firm experts discussed the trends. Here are those trends and a brief description.
1) Fees will continue to be compressed. Several factors will help this trend along, including the economics and cost allocation among custodians, asset managers, clients and advisors that are all being challenged. Further, digital engagement models, such as robo-advisors, are leveraging lower cost products and commoditizing advice. Finally, the move from active to passive products continues. Eventually, advisory fees could drop below 100 basis points, the panel stated.
2) Strategic product partnerships are changing. The increasing number of products and shrinking number of advisors and distribution space means a new leveraging of platforms and partners.
3) Home-life models come into focus. The panel noted that more than half of advisors today believe their roles are becoming commoditized. Outsourcing compliance and other issues moved to the “home-office” will free up more time for financial planning, but will shift the influence to the home office as well.
4) Millennials (and others) take sustainable investing seriously. Wealth advisors are increasingly treating sustainable and impact investing as part of the mainstream, not a sideshow. It also can be a differentiator for advisors. It can create “stickiness” with clients, especially millennials and Gen Zers.
5) Retirement planning and decumulation gain prominence. Baby boomers and millennials, the two largest demographic groups, share a critical concern: One out of every three Americans hasn’t any retirement savings, and 56% have less than $10,000. Several bills by Congress show government is trying to address the retirement issue, and several states have developed auto IRAs because there are no alternatives.
6) Digital is considered firm-wide and strategic. Today financial service firms are moving to de-silo and design digital solutions across the entire firm in hopes of delivering consistency and providing more comprehensive solutions.
7) The hybrid model is defined and refined. Experts noted that his was the year “to refine the hybrid model to stand out to have a better proposition.”
8) Data as a differentiator takes center stage. Better data management for compliance is critical for wealth managers. That said, better data management can support commercial goals: It can help advisors understand patterns of client behavior to serve individual needs, detect potential threats and risks and reduce customer churn.
9) The AI road entices, confuses and elicits glee. Advisors shouldn’t look at data as just technology but as an element of the future — and learn how to work it to their advantage.
10) Application programming interfaces inflict system change. APIs are changing the way wealth tech providers deliver services to wealth management firms, which want to deliver a unique user experience to their clients and advisors. One example: Morgan Stanley’s WealthDesk integrates BlackRock’s Aladdin via API. This type of new model of platform access might significantly alter the competitive positioning, economic model and client stickiness of wealth tech vendors.
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