Five Predictions On The Future Of Wealth Management

Evolution brings change, and the wealth management industry is certainly not an exception.

Technology is empowering clients now more than ever, and the millennial generation is beginning to grow and mature financially.

The business model of the future is changing.

PwC, for example, found in 2013 that 47% of ultra-high net worth individuals regularly use Facebook.

And, according to Deutsche Bank, "More than 33 percent of all new banking business with customers between the ages of 16 and 39 is conducted fully on the Web."

Clients of the future have different goals and preferences.

From robo-advisors and the digital transformation to shifting demographics within advisories themselves, here are five of the biggest changes that we see on the horizon for wealth managers across the board.

1. Skynet, AI And The Rise Of The Robo-Advisor

By 2020, an estimated $1 trillion in total assets will be managed by some form of robo-advisor or investment automation technology.

As robo-advisors evolve and emerge, they won’t replace human beings. Rather, they’ll enhance and augment the functions of traditional human advisors.

Robo-advisors haven’t been as widely adopted as you might think.

According to McKinsey, uptake to robo-advisory apps has been relatively slow, with two of the biggest robo-advisory apps having less than $5 billion each worth of assets under management as of 2016.

Overall, robo-advisory assets remain collectively around $200 billion, in contrast to over $20 trillion in total client assets for the overall U.S. market.

The reality of financial planning is such that not every issue has a clear answer.

Often the solution is a matter of tradeoffs and client preferences. This, of course, takes communication and education between the human advisor and client.

While robo-advisor technology is doing its part to offer innovative access to investors, it’s still a long way away from replacing traditional human advisory services.

2. Your Financial Life, Integrated

In our experience, one of the longest-standing frustrations for many investors has been the sheer number of firms, services and advisors they must deal with to manage various aspects of their financial health.

People often have one firm they highly trust to manage their retirement investments but need to go elsewhere to manage their housing or property related assets.

A client’s financial story has many moving parts.

What matters most is that they all work together on the same mission: to help the client achieve his or her life goals.

Progressive firms are starting to move toward this integrated approach to asset management, combining traditional financial planning and asset management services with a foundation in real estate markets.

These integrated efficiencies can help to lower clients' investment costs, reduce their overall tax burdens and give them more peace of mind. This is the future of our industry.

3. The Age Of Information And A Focus On You

Advancements in our ability to access information are beneficial for investors in a variety of ways. Sadly, the financial services industry has a long history of being opaque.

Investors today, however, have a much greater ability to understand their total fees, commissions, risk and return. As the veil has been lifted, we believe that competition to attract clients will force advisors to provide comprehensive financial planning.

By that we mean helping people to better achieve their goals, minimize their taxes, maximize their real estate values, manage their cash flows, coordinate their estate plan and of course, prudently invest their assets.

4. From Analog To Digital

We see it all around us: Innovation drives technology, or maybe it’s the other way around. Either way, this is a good thing for you.

Look at the way mobile devices, for example, are driving a digital transformation in wealth management.

Some 35% of client interactions now take place on some form of mobile device, making mobile the fastest growing communication channel in the financial services industry.

It stands to reason that cutting-edge firms will leverage technology to improve customer service and the user experience.

Convenience is king, and it’s human nature to want to be the most important client.

Technology will allow advisors to deliver this type of white glove service to every one of their clients, regardless of net worth.

The efficient implementation of digital solutions should also allow advisors to scale their business more cost-effectively.

Which would translate to lower fees for end investors -- or it should, anyway.

So, in theory, the outcome should be lower fees and better service: thus, why this article is titled “predictions” and not “promises.”

5. Why Age Is Not 'Just A Number.'

As baby boomers age and millennials inherit assets, we'll see quite possibly the largest generational wealth transfer in human history.

While the client base is getting younger, financial advisors and wealth managers are not.

A recent study conducted by Ernst & Young identified that only 22% of wealth managers today are under the age of 40.

Moreover, only 40% of aging financial advisors say they have a concrete succession plan in place for their client base after they retire. Attracting future talent for the next generation of financial advisors is certainly on our to-do list.

The age gap also means somewhat of a disconnect between clients and their advisors. As Gen Xers and millennials turn toward apps and robo-advisors, the industry will be forced to embrace the digital transformation to help bridge the divide.

Adjusting to the clients of the future won’t involve merely tweaking a website, creating an app or offering increased investment options.

As technology changes the way firms and clients interact, the firms that will succeed will be those that combine a digital approach with overall integration and a client-centric model. Technologies like robo-advisors will work alongside -- not in place of -- the next generation of wealth managers, who will be tasked with tomorrow’s digitally-enabled client base.

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