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June 15, 2023 at 04:47 PM
What You Need to Know
- Demand for financial advice still outstrips the industry’s capacity to serve, but that doesn’t mean established firms can be complacent.
- Clients know that they have a lot of choice when it comes to the advisory firm they work with.
- Today’s clients want more, from income planning to tax mitigation and investment management.
While there is no doubt that the rocky markets and disorienting economic conditions experienced in the past 18 months have challenged wealth managers and their clients, the importance of what financial advisors do has only been thrown into sharper relief.
In fact, from the perspective of Ben Harrison, head of wealth solutions for BNY Mellon’s Pershing, the demand for financial advice already outstrips the industry’s capacity to serve, and there is good reason to believe that demand will grow even further in the years ahead as the baby boomer generation enters retirement and younger generations enter their prime earning years.
Harrison suggests that firms that take a tech-empowered approach to scaling their business and raising their level of client service can expect continued growth, especially when investment in technology frees up advisors’ time to concentrate on “all the things that really move the needle.”
“We still see big tailwinds for wealth managers even with tougher markets,” Harrison told ThinkAdvisor during an interview during the firm’s recent Insite conference in Orlando, Florida. “That doesn’t mean growing firms can be complacent, however. There is a growing demand for the end investor to have access to more holistic, one-stop shop service.”
According to Harrison, clients are quickly coming to understand that they have a lot of choice when it comes to the advisory firm they work with — and they expect to get a lot of value out of the fees they pay. Gone are the days when just talking about investments and outperforming the market was all that was expected of wealth managers.
Today’s clients are far more discerning, Harrison said, and they want service covering everything from income planning to tax mitigation and investment management.
A Fragmented Industry
As Harrison pointed out, a significant amount of consolidation has occurred in the wealth management industry over the past decade, but that doesn’t mean the industry is now only made up of highly scaled, sophisticated aggregator firms.
“This remains a heavily fragmented business, despite how much we all read and hear about the consolidation trend,” Harrison said. “Realistically, there are still thousands of small independent shops out there, and many of them are facing big questions about the future.”
Harrison said many firms in this position are realizing they need to evolve and deliver more value to their clients, but that’s not necessarily a straightforward proposition, especially when one considers the competitive pressures that large-scale aggregator firms are bringing to bear.
Such organizations have significant technology budgets, Harrison pointed out, and they also benefit from having advanced capabilities on both the broker-dealer and RIA sides of the business. Many aggregators can also connect clients with services in the areas of insurance, workplace benefits, retirement plans and more.
