1. Global wealth management consolidation continues.

Following M&As last year that included Morgan Stanley’s high-profile acquisitions of E-Trade and Eaton Vance, we can expect more of the same in 2021, Wally Okby, an Aite senior analyst, said. The purchase of Eaton Vance “highlighted three important overlapping trends of the asset management industry”: ESG investing, the increasing importance of retail investors, and direct indexing and customized solutions, he pointed out. Morgan Stanley was the No. 2 global wealth manager of 2020, behind only UBS, according to Aite.

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2. Asset managers increasingly use direct-to-consumer distribution.

The retail intermediary market still dominates distribution, but distribution is increasingly challenging and competitive, according to Dennis Gallant, a senior analyst at Aite. Asset managers, meanwhile, continue to acquire fintech and digital advice solutions. The direct/business-to-consumer model could help offset advisor market share loss and disintermediation. Digital advice is, meanwhile, emerging as a key offering in financial wellness.

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3. ESG investing extends its reach to thematic and impact goals.

“Sustainable investing still is a bit polarizing for certain financial advisors, but it’s definitely growing quickly and it grew tremendously in 2020,” according to Okby. He predicted “we’re going to see new partnerships with leading ESG data providers [that] will become cemented and an expanded scope of analysis and coverage across asset classes, including listed alternatives” that he predicted “will begin to proliferate.” He also predicted “leading data vendors will actually push ESG data directly onto advisors’ workstations and strive to standardize it.”

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4. Advisors prepare to manage wealth transfer holistically.

“Wealth transfer, as we know, has been and continues to be of critical importance to wealth managers and private banks across the globe,” and there is a “real urgency” for firms to “get this wealth transfer journey right,” said Meghna Mukerjee, an Aite senior analyst. Enhanced training for advisors is crucial to: Build a rapport with clients’ children and heirs in a timely way; know about various aspects of philanthropy; assess portfolios’ alignment to causes that matter to clients and measure sustainability and impact goals; and use an end-to-end suite of digital capabilities to deepen current and future client relationships, according to Aite.

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5. Financial planning offerings become ever more crucial.

“With this trend, what we’re seeing is a greater focus, especially in the U.S., for large wealth managers and potentially asset managers trying to help advisors … to deliver just-in-time advice to clients,” according to Sophie Schmitt, an Aite senior analyst. “Financial planning is a critical part of the advisor business,” she said, noting “it’s even more important now that they are competing with a ton of digital wealth management firms providing low-cost investment management.” Providing great, personalized service is “really a do or die situation” now — and it must be done remotely when needed, she added.

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6. Firms focus on prospecting and the rise of social selling.

It is crucial for advisors to establish trust and rapport with clients in a digital environment, according to Aite. Prospecting has “always been a challenge” for new advisors, but even older and more experienced ones also, Gallant said. The pandemic has stepped up the need for advisors to figure out how to do it remotely, but it has also created a marketing opportunity for new business development, he said. Key requirements include: New skills, client data and analytics, a deep source of content, and personal brand development.

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7. Pressure to reorganize FA compensation models intensifies.

Globally, there is now a greater emphasis on fiduciary behavior and, in the U.S. specifically, there is an increased focus on asset gathering, adoption of financial planning, model portfolios, and higher grid-band thresholds, according to Aite. The implementation of Regulation Best Interest by the Securities and Exchange Commission in the U.S. has only made that more of an issue, Okby noted. There is also a demand for an explicit breakdown of advisory fees by service or the adoption of advice-based compensation, such as planning or subscription-based fees, he said.

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8. Efficient client onboarding takes center stage.

Client onboarding in wealth management has been a major challenge for companies for a long time, Mukerjee noted, adding it is something that must be done right. It’s typically taken several days to onboard a single client due to “clunky” and cumbersome manual processes, she said, predicting advisors will be making investments in this area in 2021 to continue improving onboarding processes. Key objectives now are for: Intra-day, efficient onboarding; frictionless and digitally led processes; dynamic data capture from prospecting stages through the entire client lifecycle; intelligent “Know Your Customer” and due diligence checks; richer client insights and personalization options; advisors providing real value-added services; and enhanced security.

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9. Analytics enable sales and service.

Analytical models are starting to pay off across the client lifecycle when it comes to prospecting, onboarding, servicing and retention, according to Aite. “As wealth managers have gotten better at gathering and centralizing data – both structured and unstructured – and as more clients are creating data through social media” and on client portals, there has been a “greater use of analytical models to guide the client journey,” Schmitt said. She predicted greater investments being made this year in analytical models and tools to leverage all the data for efficiency purposes and better personalized service, as well as to reduce attrition.

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10. Reservations around cloud deployments slowly evaporate.

“Increased awareness around cloud solutions by regulators and wealth managers alongside successful implementation projects are pushing cloud adoption forward,” according to Aite. Wealth managers “slowly are becoming more open to it,” Mukerjee said. This is being helped by trusted vendors that are championing cloud technology, she noted.

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Related: 10 Top Trends in Wealth Management for 2020: Aite Group

Despite the many challenges of 2020 that have spilled over into 2021, last year turned out to be a strong one for the wealth management industry overall, according to Alois Pirker, research director at Aite Group.

Among the highlights of last year: Morgan Stanley’s purchase of E-Trade and Eaton Vance, as well as pandemic-fueled market volatility, a quick shift to global remote work, many businesses nearing the “brink of bankruptcy” and massive job losses, he noted Tuesday during the webinar “Top 10 Trends in Wealth Management, 2021: The Future Is Now.”

Luckily, however, the markets “held up, and more than held up — [they] hit new highs” in 2020, “supported by various government actions around the globe,” he said.

Therefore, although 2020 was “hard for everybody … for the wealth management industry,” it turned into “a good year” in which many firms were able to grow their client bases, he said. Citing a comment made by a Merrill Lynch executive, he said: “The wealth management industry has just made a five-year leap forward as far as digital client engagement is concerned.”

Pirker predicted a continuation of digital transformation trends in 2021. “The length of the pandemic is changing our industry for good,” he said.

“Time is of the essence for wealth management firms to embrace the new normal and to invest in staff and infrastructure to keep up with client behavior and faster-moving competitors. Firms that miss this cue risk losing market share and also may become acquisition targets.”

See the gallery above to view the top 10 trends in wealth management that Aite is expecting in 2021.


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