As we celebrate the holiday season, my thoughts are full of gratitude to clients and readers for your kind support following my homecoming this year. With the aid of new technology, we can now look forward to a bright 2017.
Digital technology for wealth managers was highlighted in “Megatrends that are reshaping wealth management,” an article published this week by Financial Planning Magazine. The following points caught my eye:
REVOLUTIONARY IMPACT OF DIGITAL ADVICE
Robo advisers are a growing phenomenon, offering personalized investment advice through online, digital and mobile platforms. Many industry professionals predicted that the robos’ early success would do to advisers what Amazon did to booksellers or Expedia did to travel agents.
That didn’t happen.
Instead, robos brought needed client experience innovation to the industry. This enhanced, automated service model provided easy-to-use interfaces, account aggregation capabilities and wealth views, along with advanced mobile access and paperless account openings. Robos ended up presenting the wealth management industry with powerful new capabilities that should be adopted as welcome innovations.
Advisers will need to up their game in articulating the value they provide by highlighting their relationship-based and behavioral finance services models. If advisers are purely transaction oriented, then their long-term sustainability is in doubt, as those functions will be replaced by robots that can do those services faster, better and cheaper.
THE AGING OF HUMAN ADVISERS
Retirement trends are accelerating in general, and advisers in particular will start to retire in large numbers over the next few years, creating both challenges and opportunities for industry participants.
According to multiple industry studies, the average age of advisers is getting close to 60 years old. There are now more advisers over the age of 80 than under age 30. The industry is faced with an urgency to develop a transition plan. The industry has not planned appropriately, creating angst among executives and end-clients alike.
The recent uptick in mergers and acquisitions among advisory firms is expected to continue as advisers look to monetize their businesses. The next big question for the industry is: Where will be the next generation of advisers come from?
THE CONTINUING SHIFT TO INDEPENDENCE
This perfect storm of industry developments has created the megatrend of employee-based advisers leaving their mother ships and going independent as a startup RIA, joining an existing RIA or aligning with an independent broker-dealer as a contractor representative.
As technology has improved, advisers no longer need to have a vast institution to provide them with access to investment products, client service capabilities or money movements.
According to industry research firm Cerulli, approximately one quarter of current wirehouse advisers will become independent over the next few years.
WHAT DOES THE FUTURE HOLD?
The future is already starting to emerge as investing becomes more of a commodity and technology is playing a bigger role in the delivery of wealth management advice.
We believe that advisers will become bionic in the sense that they will provide a combination of human advice with technology-driven operational efficiencies to deliver content and services through various channels. This will create more capacity in the industry to adjust for the decline in the population and enable advisers to more economically serve smaller investors.
As I saw these trends taking shape, I redirected my time in the past couple years to developing information technology that would support my blogging, report writing and portfolio management activities. While the project took on some larger than life dynamics, and presented many challenges, I’m happy to say that early in the New Year the results will become apparent.
Yes, Happy New Year and all the best to you and your families!
/Bill