5 Trends That Are Powering Advisor Growth

Slideshow December 18, 2023 at 09:48 PM Share & Print

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Envestnet’s market intelligence team has identified key themes and trends that it says will power advisor growth and shape the financial advice industry in 2024 and beyond.

The team analyzed market data, third-party research and a survey that the firm fielded earlier this year for a report that highlights the evolving landscape of financial advisory services and the increasing role of technology in the sector.

“The wealth management market has long faced challenges with fragmented technology and inefficient workflows,” Chris Shutler, Envestnet’s head of strategic development and market intelligence, said in a statement. “To not only improve service delivery but also stay competitive, it’s crucial for firms and advisors to keep pace with these developments, addressing challenges through a holistic, integrated platform.”

See the accompanying gallery for five trends that are reshaping financial advice, according to Envestnet.

Michael S. Fischer

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1. End-to-End Technology and True Integration for Advisors

Advisors are demanding end-to-end technology platforms and improved integration, a need that extends beyond single sign-on capabilities to deep connectivity between systems and software providers. Even among their existing tech solutions, firms want to improve adoption and utilization rates to take full advantage of their investments. Envestnet’s survey found that advisors’ top areas are integration of client engagement tools and improvement of custody workflows.

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2. Evolution Toward Holistic Advice

From an investment perspective, advisors have the potential to add more than 300 basis points in annual value for clients, particularly through tax-efficiency and behavioral coaching, Envestnet found. It noted that amid this ongoing evolution toward more holistic advice, the scope of advice is expanding, and advisors increasingly need to add value beyond investments for their clients. Areas include estate planning, tax advice, loan and credit management, life insurance and health planning.

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3. Retirement as a Growing Opportunity for Advisors

Envestnet expects the workplace to be a significant path for advisors to attract assets. Challenges facing many small and medium-sized businesses in accessing workplace retirement plans, combined with regulatory tailwinds and technology innovations, are making it easier for non-retirement-expert advisors to offer retirement solutions. As well, they can help employers integrate financial wellness tools into their benefits packages as a competitive differentiator, yielding higher employee satisfaction, productivity and employee retention rates.

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4. Leveraging Data and AI for Personalized Service

Envestnet’s research identified growing client demand for personalized services, achievable through data aggregation and next-best-action insights. A majority of advisors in the firm’s survey saw potential for these types of insights to improve their business or advice to clients, but have yet to implement them. Many firms that are leveraging artificial intelligence-powered next-best-action insights are seeing enhanced efficiency as well as improved client interactions and service delivery.

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5. Growth of Managed Accounts as a Preferred Choice

The advice industry is witnessing a migration from commission- to fee-based accounts. Envestnet's analysis showed that managed account assets have experienced double-digit growth across all distribution channels. Use of data, technology and the insights generated can help advisors determine and demonstrate that a managed account, and specifically a unified managed account, may be in a client’s best interest. Envestnet expects unified managed accounts to remain the fastest growth area of managed accounts within this segment, as they allow multiple investment vehicles to be combined into a single account for a unified view and customized client solutions.

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