Hit The New Year Running: Wealth Management Predictions For 2021 And Beyond

Remember the future? It’s still coming even after a year of defense and delay. Keep your eyes open.

This is not going to be the usual round of crystal ball gazing designed to fill a slow news week. Last year showed that such pondering is at best obvious and at worst a complete waste of time.

So let’s get my top 2021 prediction out of the way right away: In the next 12 months, I wouldn’t be surprised if 10-20% of your fellow advisors leave the business.

That’s going to reshape the industry. And the odds of it coming true don’t depend on any external headlines or twists in the market cycle.

We aren’t trying to game the Senate or the new mood in Washington. The economy can blow hot, cold or (more likely) both ways at once.

The world will remain a surprising and volatile place. Like just about any year, we’ll have to brace for the prospect of war, currency crash, commodity crash, poisoned politics, pandemic and so on.

Most of these doomsday scenarios never happen but we refresh them every year to check our contingency plans. It’s like a fire drill.

But this year, we’re looking at a transformed wealth management landscape as many of your fellow advisors head for the exit.

It’s just demographics and basic psychology. About 1 in 5 advisors are now closer to 70 than 60.

Last year was exhausting, especially if you had to break decades’ worth of career habit and learn a lot of technology on the fly.

If only half of those retirement-age advisors are now thinking seriously about selling out and moving on, we’re looking at a 2008-style tidal shift.

And the industry that emerges on the other side will be younger, at least in spirit. More comfortable with technology. Able to reassess client relationships and keep shuffling the value proposition to keep fees flowing.

The Great Transition

We talk a lot about the Baby Boomer asset transfer but the mechanics of that trillion-dollar pivot remain relatively nebulous.

These clients formed bonds with advisors from their generation or older. Some of these advisors made an effort to communicate with the heirs. Most didn’t.

Either way, as the advisors themselves leave the stage, someone else needs to take over these families. This might be an internal successor groomed to step up, an outside consolidator with ambition or some new type of advisory service provider we don’t know a lot about yet.

In theory, robo platforms could anonymously capture more and more millennial accounts and the industry as we know it could be on its way to extinction. I don’t think that’s the case, though.

People like working with people. Rich people realize that a human being with access to world-class technology creates better outcomes than the technology can pursue on its own.

And even “digital natives” relish personal contact. They just appreciate it when it comes through a screen.

Meanwhile, technology doesn’t make strategic choices. Decisions the rising generation of advisors make in 2021 will shape the industry for decades to come.

The way advisors market themselves has already changed. Zoom meetings with clients and prospects were once considered exotic. Now they’re essential.

Once you no longer have to be within driving range of the client meeting, you can chase assets everywhere your credentials permit you to go.

Some of the M&A we’ll see in 2021 and beyond will be shocking. Deals that would not have made sense at any other moment in history can now deliver strategic ROI.

You can only have one face-to-face meeting at once. A world of ubiquitous screens opens up creative new capacity expansion ideas.

Hold open office hours. If nobody “shows up,” do work in the background. Jump in and out of partner work to ease their load and capture a little extra fee income.

Think about how planners work with Vanguard and other direct investment hubs now. It’s a version of the gig economy, but like old-school workshops and consultations, it can lead to recurring relationships.

It isn’t bad. But it’s new. If you don’t like that world, the exit looks more appealing, and that’s okay.

Not All At Once

Five years from now, bright-eyed planners who graduated in 2009 will be in their mid-40s. They’ll be the industry center of gravity.

Their work habits, preferences, skills and personality patterns will become mainstream in the very near future. Maybe they’re actually already there.

If you’re in your first decade in the industry, I’d love to talk to you. We’re all in this together.

And of course, transitions take time. Negotiations that start in 2021 might continue into 2022 or 2023.

By that point, other advisors will be another year or two closer to starting their own retirement processes.

It isn’t an all or nothing thing. Many will stick around in some capacity as long as they’re having fun. Call the new role “planner emeritus” or just use the old euphemism “special projects.”

Market conditions and the news cycle will accelerate or brake these trends. When people feel cheerful, they’ll stick around longer. When nerves fray, we all think a little harder about the exit.

New technological toys will keep coming. Try them out. See if they make your life easier or not.

Remember, the tech cycle is only two years long. By late 2022, we can expect phones, tablets and other screens to be twice as powerful, twice as small or simply twice as ubiquitous.

A lot of firms dabbled in voice computing before the pandemic took over. Some of that development stalled but the rest is now a year closer to prime time.

It’s going to be fun. Meanwhile, new investment models have emerged as viable challengers to the old traditional efficient frontier.

They were already there. But now, like RNA vaccines, people recognize that there’s a need for them and the capabilities they provide.

Look for portfolios to get both more efficient and more responsive to client needs. Again, it’s going to be good.

What About ____?

What happens in Washington? What’s my S&P 500 target for 2021? Will we hit Dow 40k before retesting Dow 20k?

Where will regulations and taxes go?

Who knows. While we can make educated guesses, acting on guesswork before the details become reality is a recipe for disaster in the long run.

Odds are good taxes and regulations have gone as far as they can for the near future. They're going to start edging in the other direction now.

Washington will remain a morass of partisan gridlock until a crisis bigger than COVID emerges to unify the country. It just isn’t “that bad” now.

That crisis might hit in 2021 or take years to gestate. We could end up with the end of dollar hegemony, the downfall of the Treasury’s credit rating or the Social Security account emptying out.

These have all been hypothetical futures for decades now. People talk about them all the time. People also watch horror movies.

If things get that bad, we work together to find solutions. Otherwise, solutions may emerge early, but they might also get pushed under the political headline crush.

Trump is not leaving. That’s not news.

The Fed is not going to kick the economy while it’s weak. That’s not news either.

When it matters, it will matter. Until then, your clients matter, day by day.

Every year, we bring out our crystal balls. It’s a ritual. Meanwhile, life goes on, proving some forecasts right and turning others into jokes.

It’s not really about predicting the future. It’s about generating scenarios – some plausible, some outrageous – that refresh our strategic posture.

We want to make sure we can anticipate any plausible development, lowering the odds of getting caught completely off guard.

But good things happen too. Plan for the worst. Hope for something calmer.


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