2020 changed every industry, and wealth management is no exception.
Wealth management faces significant disruption on several fronts — primary among them are increasing customer expectations, demographic shifts, and a rise in regulatory obligations.
Let’s dive a little deeper into these leading wealth management trends.
A new generation of investors increase customer expectations
Between now and 2030, boomers will pass more than $15 trillion in assets to younger generations. By 2045, that number balloons to $68 trillion. Armed with wealth from this transfer, a new generation of investors bring with them expectations set by consumer technologies. Services like Amazon, Uber, and Doordash with omnichannel service and omnipresent availability createthe standard for how investors want to interact with their advisers. They expect their adviser to provide them with a rich digital experience and provide service and advice in an omnichannel fashion — available whenever and wherever the client needs them.
This new generation of investors’ expectations extend beyond technology. They want to maintain more control over their financial lives and partner with their advisers to understand recommendations, making the ultimate investment decision themselves. As a result, they are less likely to be interested in fully discretionary services and frequently want to conduct research themselves. Firms can respond by providing robust platforms that enable their clients to research investment products and strategies and then collaborate with their adviser to gain a broader perspective and execute decisions.
Aging advisers disrupt traditional relationships
The average financial adviser in the United States is more than 50 years old; only 5% are under the age of 30. With more than half of advisers spending as much time planning their own retirement as they plan for their clients’ retirement, the table is set for a massive disruption in existing advisor/client relationships.
Many more tenured advisers are slow to adopt new tools and technologies. Their reasoning is that they have become successful in doing business a certain way and their systems and processes work for them. How often do you hear, “That’s how we’ve always done it?”
Unfortunately, “how we’ve always done it” won’t cut it any longer. In order for investments in new tools and technologies to pay off for wealth management firms, it is important to think meaningfully about change management and work closely with advisers to understand their pain points and give them a strong ‘whats-in-it-for-me’ when rolling out a new platform.
Rising regulation presents a challenge
These wealth management trends play out against a backdrop of increased regulatory scrutiny. Wealth firms have a myriad of existing activities that come with regulatory risk: conducting adequate KYC & AML processes for new clients, applying suitability standards to investment recommendations, and supervising advisor communications and marketing activities.
Safeguarding client data should be top of mind for every wealth investment firm moving forward.
As many as 60% of corporate security breaches are caused by people inside the company. Keeping personally identifiable information (PII) secure from external threats continues to be a priority. This means that it is not enough to protect outsiders from breaching corporate security, but wealth firms must set appropriate guidelines and controls for access to sensitive data and monitor employee access to ensure that employees are only accessing the data needed to do their jobs.
2021 will bring a new administration to Washington, and with it, potential for consumer protection legislation, especially those related to conflicts of interest and disclosure in the sale of retirement products. Any administration change presents uncertainty in new or different regulations and how firms will need to respond.
President-Elect Joe Biden signaled during his campaign that Reg BI, while a move in the right direction, did not go far enough in setting a standard to ensure wealth firms placed their clients’ needs first. While it is unlikely that Reg BI will be displaced in the short term, changes in SEC interpretation may lead firms to tighten their process to explain the rationale behind investment recommendation and document how they have disclosed any conflicts of interests such as preferential compensation arrangements.
How to get ahead of these wealth management trends
Wealth management trends such as these make it imperative to have the tools in place to navigate the change necessary to keep pace with the wealth industry. Whether you’re looking to build a more personalized customer experience or more effectively manage your customer data, Silverline can help. Our team offers deep expertise in what it takes to create a client-centric engagement model with technology that empowers your advisors to deliver the experience your clients expect in a secure and compliant fashion.
If you currently have a Salesforce solution in place and are looking to optimize, or you’re still evaluating how Salesforce can set the foundation for delivering your desired advisor and client experience, Silverline is poised to help.
Planning for 2021? Learn how we can help you build relationships with purpose.