Two things you can always count on in January: resolutions and predictions. It’s that time of year when industry experts try to identify the trends that will have the broadest impact on the wealth management industry, and particularly RIAs, the year ahead. I don’t pretend to have a crystal ball, but I do talk to a lot of advisors, as well as with colleagues across the SS&C network. Here are a few of the topics that keep coming up in conversations.
- The empowered client: The segment of the population that is comfortable using consumer technology, especially mobile, continues to grow. More and more investors are comfortable with online self-service as they seek information and conduct business. This could be a benefit to advisors as clients become more engaged in their financial activities and require less hand-holding. On the other hand, advisors will be more challenged to demonstrate the value they bring to the relationship.
- Artificial intelligence gets real: The impact of AI on the advisory industry will not be blunt or sudden, but subtle and gradual, occurring in different places at different times. In the near term, the growing use of AI in automated investment platforms, trading, and portfolio decisions will further reduce the time advisors spend on portfolio management and accelerate the shift to a more planning focused model.
- Competition for clients – and for advisors: Demographics are at the root of a fundamental change in the industry. Advisors are retiring from the profession faster than they are being replaced. Firms are competing not only for clients, but for talent. And they’re competing not only with each other, but with technology companies and tech-powered start-ups. Future clients and advisors alike will come from the digital-native generation, and firms will need to be able to meet their technological expectations.
- The ascendance of planning: Assuming the market remains buoyant and continues to favor passive investments, investors will place less importance on investment strategies and security selection, and more on holistic financial planning. Advisors stand to benefit from technologies that enable them to deliver personalized planning capabilities efficiently and at scale.
- A premium on personalization: Even as the industry becomes more data intensive and technology dependent, clients expect their wealth management firms to know them. They expect the advice, reporting, and communications they receive to be relevant and meaningful. Firms that empower their employees to deliver a truly personalized client experience will be in a better position to attract and retain clients.
Trend-watching is a tricky proposition – especially in an election year when anything could happen. A major market correction could reset the table entirely. Reg BI is due to go into effect for broker-dealers in June, and its potential impact on the advisory business as a whole is far from clear. As part of a technology company, I tend to look at things from a technology perspective. And a theme we see in all these trends is the role of technology, either as a driver of change or a solution to help advisors manage change. Whichever way the wind blows, firms that invest and stay up to date technologically will be better equipped to either ride the wave or weather the storm of change.