Five trends that will upend wealth management in the next decade – and how to profit from them

Buckle up for big changes in wealth management.  Right now, five major trends are taking shape, trends that will remake the industry and create a whole new set of winners and losers.  

Adapting to the new reality will demand skill, flexibility and forethought from advisors – but their technology partners will also play a major role.  Financial technology firms like Innovest Systems and Logia Portfolio Management offer the kind of SaaS based, scalable, open architected applications that can help advisors thrive in a changing environment by embracing connectivity to other third parties and disparate systems.

To help advisors adapt, Innovest Systems has identified the five mega trends trends that will dominate the financial advice business in the years to come – and created an action plan for helping advisors turn upheaval into opportunity.

The five mega trends you need to know about:

  1. The DOL Fiduciary Rule. The proposed rule would completely overhaul the sale of IRAs and Roth IRAs and fundamentally change the rollover business by applying the same ERISA standards that govern pension plans to individual retirement accounts.  Whether you like the DOL fiduciary rule or not, whether it even survives in its current form (the DOL recently delayed implementation until mid 2019), it’s already changing the retirement planning landscape.  Companies are re-engineering products and business models.  Investors are asking questions about whether you’re acting in their best interests.  It makes sense to get ahead of this trend by working towards a true fiduciary model.  By adhering to a fiduciary standard, you can reduce your  legal and regulatory risk and offer better solution for clients and an attractive selling proposition to prospective clients.   Depending on the business model, this may mean a significant retool for some, or some simple refinements for others.
  2. Shrinking investment returns. Market returns for the past 30 years have spoiled investors and advisors alike.  Annualized returns of 10% from stocks and 6% from bonds have done wonders for building wealth, masking investment mistakes, and covering excessive fees.  Unfortunately, economic projections and market valuations suggest the party is over. Returns more in line with long-term historical averages -- 5-7% on stocks and 2-3% on bonds — may be back for the foreseeable future. In this more modest return environment, advisors that can assist clients with withdrawal and social security claiming strategies, asset location across different account types, and systematic tax-managed trading will be doing a great service for their clients and separating themselves from conventional advisors.

  3. The Grey Wave.  The baby boomers are retiring en masse, remaking wealth planning just as they reshaped popular music, fashion, parenthood and the workplace.  Today, boomers are moving from wealth accumulation to conservation and even distribution, creating opportunities for advisors who can keep pace with their needs.  Generally speaking, they are less concerned with how to grow their wealth and more interested in how to protect it, consume it wisely, and leave a legacy to their heirs.  This change in priorities requires new thinking and new tools.  Trusts, for example, may serve a valuable purpose but can only be deployed by advisors with access to and understanding of the capability.

  4. Invasion of the Robo Advisor.  The beauty of robo advice is truly in the eye of the beholder.  For the conventional, high-priced, low value advisor, it’s viewed as a material threat – and ought to be.  For investors looking for an inexpensive, commodity-based investment solution, the new option should look pretty appealing.  For advisors and firms looking for ways to augment their services and reach mass affluent investors cost-effectively, robo advice will ultimately serve a useful purpose.  The bottom line is the technology-only solution is a long way from replacing the value a high-quality advisor can add by helping clients manage through all the emotions, decisions, and strategies they’re facing.

  5. Price Compression. The pressure on pricing in wealth management is inescapable and a product of all of the other trends mentioned.  The Fiduciary Rule shines a bright light on the subject.  Modest expected returns make the matter more important than ever.  Retirees concerned with stretching their income stream are more attuned to cost.  Robo advisors offer a lower cost competitive alternative. For advisors and their firms it is critical to demonstrate value– value that trumps automated robo advice and justifies advisory fees for the services rendered to retirees.  Achieving these objectives will go a long way to meeting anyone’s final definition of a fiduciary standard.

How to Survive and Thrive in the Age of Change

For advisors and firms in the wealth management business, it’s time to reexamine business plans and priorities. To succeed in a rapidly evolving market, advisors will have to make tough decisions and adapt quickly to disruption.  Success depends on knowing and capitalizing on your inherent strengths, while delegating ancillary tasks to proven, trusted partners.  Use these discussion points to tailor a strategy for your own practice’s distinct characteristics:

Focus on Your Core Competencies.  Changes in regulations, market expectations, demographics, and technology have escalated the complexity of the wealth management business for clients and advisors alike.  In this environment, the winning formula will be defined more than ever by delivering high-quality advice and building durable, trusted relationships, not by trying to serve as a jack of all trades.  Ask yourself:

  1. Who is our target client base and what do they need?

  2. How do we bring value to our clients and help them meet their goals?

  3. How do the major market trends affect our clients and what can we do to help?

  4. What can we do to make our service even more distinctive from our competitors?

  5. Where do we need help to serve our clients and set ourselves apart?


Developing the Right Eco-System to Augment Your Business.  Focusing on core competencies naturally means looking to other parties to perform key supporting functions.   Choosing those parties is crucial.  Ask yourself:

  1. How do the capabilities serve the needs of our clients?

  2. How do the capabilities support and enhance our value proposition?

  3. How do the services offered help address the major changes going on in the industry?

  4. How can the service provider help to reduce our workload, enhance control, and scale our business efficiently?

  5. Is the pricing model rational and suited for a world with fiduciary standards?


Innovest Systems and Logia Portfolio Management are aware of the challenges facing wealth management firms today.  Each has invested heavily in technology and strategic relationships that speak directly to the new needs of the market. Our goal in leveraging our technology platforms is to position our clients to capitalize on the changing landscape by shifting their business focus from one of operational concern on how to adjust to shifting market dynamics to one of opportunity on how to take advantage of what the market dynamics bring to bear.


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