Top 9 Trends in Wealth Management

Wealth management firms must remain on top of current trends if they are to capitalize on market opportunities. The change in investor demographics is one of the most significant changes in this market in recent years. 

For example, current investors are aging and being replaced by Millennials, who often have very different ideas about what to do with their money. Furthermore, women are increasingly likely to make a family’s financial decisions based on new investment models.

Technology is another area where wealth managers need to remain competitive. Big data can help them achieve deep insight into the products and services they should offer, providing greater value for their clients.  Artificial intelligence (AI) can also drive the development of new applications that can dramatically improve operational efficiency for both the front and back office.

The following nine trends describe some of the most significant changes occurring in wealth management during 2021.

1. Debiasing Techniques

The profits of wealth management funds are slipping, making it challenging to retain clients who are switching to passive index funds. Fund managers are responding by using machine learning to identify cognitive biases and suggest corrective measures.

These techniques can analyze a broad range of data to show where emotions drive investment decisions, triggering alerts to the manager. Debiasing techniques will help fund managers develop long-term winning strategies based on reason rather than one-time wins resulting from their intuition.

This strategic shift will increase profits and improve the value of actively managed funds for investors.

2. Digital Channels

“The latest generation of high-net-worth (HNW) clients is increasingly likely to consider digital channels for managing their wealth.” says Brett Henderson of Henderson Wealth Management in El Segundo, CA. “Wealth management firms already have access to customer data, but they often lack the tools needed to obtain insights from this data. This will be critical moving forward.”

Advisors need to leverage technological approaches to develop offerings that meet changing customer demands by maximizing the value of customer data. Many firms are starting to use predictive analytics to develop value propositions targeted at each customer.

This strategy should include the study of unstructured data, such as investor preferences, lifetime values, and investment history to predict future client behavior. These forecasts can facilitate the process of up-selling and cross-selling new products to investors.

The use of digital channels for wealth management will increase customer loyalty as data analytics increase returns on investment (ROI) for investors. Wealth managers will also be able to deliver the personalized offerings that today’s investors expect by obtaining a complete view of the customer.

Furthermore, this trend will open new revenue streams as wealth management firms leverage customer data through technology providers.

Yetti Esatu, Owner of Family First Financial & Wealth Strategies is a great example of an advisor who is taking full advantage of digital channels to grow her practice.

Esatu has been endorsed by her clients as one of the top family wealth management experts in the nation. She has developed a mastery of strategies clients need to shield their hard-earned savings for a more prosperous lifestyle and retirement.

Without advanced digital channels, her business wouldn’t be where it is today – and she’s not alone! Advisor Gurdayal Singh has seen it positively impact his business, too.

Gurdayal Singh specializes in planning for small businesses and individual families. Life, Health, Disability insurances, Pension Plans, 401K, IRA, and college education plans are among the many services provided by him.

Through his own digital presence and the use of different digital tools, Singh has been able to reach more of his ideal clients and serve them to the highest degree. Thousands of other advisors have enjoyed similar results over the past 12-18 months.

3. Agile Distribution Models

The adoption of agile distribution models is making offerings from wealth management firms more responsive to customer needs. These firms are currently shifting their focus from products to customer service during a period of increasingly strict regulatory environments.

These changes will require an investment in agile technology to achieve a rapid response to market changes that clients currently expect. This technology will also aid firms in providing personalized services for their clients.

Wealth management firms have been historically slow to transition from legacy infrastructure to microservices that would allow them to deploy new capabilities quickly. However, they’re now using agile models to cross-sell and up-sell additional services to clients.

Analytical capabilities can also estimate the probability that a client will accept an offered service through an agile distribution, such as a self-service channel. Clients who hesitate to pay for advice can thus become strategic customers for wealth management firms.

Many advisors are embracing this shift to customer service and highly engaging customer experiences. This includes advisors like Mary Brimer.

Mary Brimer is the President and Owner of Ginger Green Financial and is licensed in 14 states. She believes money should represent a source of freedom and choice in the lives of her clients. Her unique wealth strategies help women – particularly executives, divorcees, and widows design financial security in the present through their retirement.

With advanced technology and age distribution models, Mary is able to focus on a very specific demographic. This amplifies her ability to provide exceptional high-touch service.

The same goes for financial advisor Daniel F. Spagnolo, who is committed to helping business owners stay focused on what matters most: growth. He does so by providing them with everything from forward-thinking retirement strategies to the creation of shareholder agreements that are funded with company-owned life insurance. And because the client’s best interests are always in mind, his clients are as loyal as they come.

Spagnolo’s client loyalty all comes back to his ability to create tailored portfolios for his clients. This hands-on approach helps build a trusting relationship.

The best part is that age distribution models are steadily improving. In fact, we’ve seen significant innovation since the start of the pandemic.

Agile distribution models now provide firms with greater access to new clients, especially younger investors who are more eager to adopt digital technology. The use of currently available data will also enable the development of services that reduce client attrition and improve client engagement.

Additionally, agile distribution will allow wealth management firms to meet new demands from clients more proactively.

4. Augmented Reality and Virtual Reality

Augmented reality (AR) and virtual reality (VR) help wealth management firms make managed investments more intuitive for clients, especially Millennials. The adoption rate of these technologies should increase as advisors become more familiar with their capabilities with respect to financial services.

AR and VR are also useful tools for engaging clients through gamification, which uses elements of game-playing to influence client behavior. HNW investors are looking for more innovative ways to interact with wealth managers as they become more technologically savvy.

Managers can’t afford to lag behind retail bankers in this area because these clients are seeking digital experiences in all parts of their lives. Attracting and educating Millennials on the benefits of managed investments is another driving factor for the increased use of AR and VR in wealth management.

Self-help channels can make extensive use of these technologies, allowing investors to understand their market better and help them maximize their returns. Virtual trading can also help train advisors on client interactions, helping them understand their clients’ needs more effectively.

5. Reducing Compliance Costs

Technology is simplifying the reporting process needed for regulatory compliance in wealth management. Frequent changes across multiple jurisdictions are driving these firms to leverage solutions that streamline their operations and reduce their costs.

Thus, partnerships with solution providers will become essential for allowing firms to respond quickly to changes in the regulatory landscape. New regulations on data privacy include the Fiduciary Rule in the United States and the General Data Protection Regulation (GDPR) in Europe.

These regulations have increased the need for data governance. They are also driving firms to seek technological solutions to compliance requirements, especially their approach to managing liquidity risk.

Regulatory solutions will reduce the capital investment that wealth management firms need to make when responding to regulatory changes. They will also automate many reporting tasks that many firms currently perform manually.

Additional benefits of these solutions include dashboards that provide greater visibility of liquidity monitoring.

6. IoT

The Internet of Things (IoT) is allowing wealth management firms to find new ways of using client data. The trend towards automated portfolio management requires IoT to collect the data needed to customize services and products for each client.

These non-traditional sources of data will help firms assess their clients’ financial needs in a less intrusive manner. They will also provide clients with greater insight into their lifestyle, allowing them to understand their potential for future savings more quickly.

IoT devices can capture real-time data, such as saving and spending habits, that can be analyzed to determine a client’s tolerance for risk. This capability will ensure the offers clients receive during onboarding are more relevant.

It allows firms to provide greater personalization for each client. The proliferation of IoT devices also helps firms profile clients more effectively using intuitive interfaces.

7. Technological Investments

Many wealth management firms are reassessing their investments in technology after a period of minimal returns. The frequency of these evaluations will increase as new technologies become obsolete more quickly, often within three to five years.

Significant differences in implementation between firms also make standardization difficult in many cases, further limiting the ROI of many new technologies. Additionally, many wealthy clients prefer a balanced approach between technology and human advisors.

Remaining competitive in this environment requires wealth management firms to strategically align technological investments to business requirements. This will reduce the risks of implementing new technology.

This trend also means that firms should begin collaborating with providers of financial technology to address problems resulting from legacy infrastructure. These new tools should help advisors engage clients more effectively at a lower cost.

8. Virtual Tools

Wealth advisors have traditionally allocated their resources to clients based on the assets of each client. However, this approach may not be the most efficient when using technologies that reduce the need for direct interactions with clients.

For example, virtual tools can provide established clients with regular reports on the performance of their assets, allowing advisors to focus on gaining new clients. Thus, the use of these tools to automate client interactions helps relieve the current cost pressure for wealth management firms.

Virtual tools can also improve customer relationships by helping firms shift from Customer Relationship Management (CRM) to Customer Interaction Management (CIM), which focuses on the interaction between advisor and client. Smart assistants can understand clients’ questions, make detailed responses, and sell products.

Whispering agents can help advisors by suggesting dialogue to engage the client better. This capability is especially important in the mass wealth market, where advisors need to scale their operations quickly while still providing personalized services.

Next-best-actions tools also help advisors streamline their advisory roles by recommending courses of action for clients.

Virtual tools will drive the engagement of clients through omnichannel digital marketing. They will also reduce operational costs by automating functions, especially those related to regulatory compliance.

Additional benefits of virtual tools include driving behavioral changes in investors by helping them make data-driven decisions.

9. Adoption of Open APIs

The trend toward open banking during the current period of low interest rates is squeezing profit margins, driving wealth management firms to seek additional revenue streams. Many of these firms are exploring partnerships with third parties that can develop and deploy application programming interfaces (APIs) more quickly than in-house efforts.

Innovation in this area has been historically slow, despite the desire for more digital experiences from the latest generation of investors. Newcomers to the financial services sector are responding to this need with investment products for mass-affluent clients at low rates, making it essential for established wealth management firms to follow suit.

This growing competition is resulting in client attrition, making traditional business models unsustainable in the long term. Banking-as-a-Platform is a solution to this problem, which provides benefits for both wealth management firms and API developers.

For example, wealth managers gain access to the new API, which offers faster deployment and more considerable data expertise. APIs also provide the developer a customer base, domain knowledge, and regulatory knowledge.

The lower cost of innovative APIs will aid firms in retaining their existing clients and attracting new prospects. The improved service deployment that APIs provide will also enable an omnichannel experience for clients and create new revenue streams.

Additionally, partnerships with financial technology providers will help wealth management firms adopt an automatic-processing culture.


Recent technological advances are driving several trends in wealth management for 2021. Although this sector has been historically slow to adopt new technologies, these new capabilities offer multiple opportunities for these firms to improve their bottom line.

Young investors have a particularly strong desire for a consistent experience across all communication channels, requiring solutions to be integrated into a firm’s existing operations.

New players in the financial services market should also drive established wealth management firms to remain competitive. They can do this by using their existing client data to develop products and services that will meet their clients’ demand for personalized services.

Increased customer engagement is another strong trend in wealth management, which is essential for growing client bases amidst increasing competition and shrinking profits.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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