It’s not a revolution; it’s a reinvention

Is there a facet of wealth management that isn’t being touched by change?

From the individual level, where advisors prospect and connect with new clients, all the way up to the largest custodial institutions and their industry-shaking M&A deals, the competitive landscape is undeniably being altered and accepted norms of how business is done are being challenged.

My AdvisorEngine colleagues have argued what wealth management is experiencing as of late is a ‘hyper cycle’ of change, brought about by the intersection of megatrends in four categories: client expectations, technology, demographics and competition.

The same cycle, they noted, was already spinning when the pandemic hit – and that global event only sent it into overdrive.

As an advisory firm, it’s important to understand how the big picture ultimately impacts your business. What I’ll posit here is that you look at this moment not as a revolution in wealth management, but rather a reinvention.

Consider each of the four wedges of the hyper cycle.

You probably have enough anecdotal evidence from your own practice about how client expectations are changing. From a digital perspective, there’s agreement that eCommerce giants have trained your clients to demand a level of simplicity and personalization in their interactions with you.

A shift in the clients you’re dealing with has likely begun too. The good news is Gen X and Millennials aren’t captive to robo-advisors as many once feared; they want the reassuring guidance of an advisor. But their needs and financial concerns – as well as their investment options – are different than generations past.

Digital-first clients means you can’t run your practice off Excel, Outlook and paper anymore. And wealth management technology itself is no longer the domain of a handful of institutions; even the novice retail investor can access sophisticated market research, data, and real-time trading through mobile apps today.    

Those same trading apps are just part of the wider scope of competitors seeking the same prospects as you are, including hybrid human-automated advice platforms which are increasingly being bundled with banking and even wellness.

In each megatrend, though, the wealth management practitioner isn’t facing a revolt. Rather, it’s a challenge: Adapt to the changes happening and reinvent your offering.  

Early industry studies from major custodians have shown that advisory firms taking that forward positioning – investing in new technology, focusing on offering better client experiences, and being flexible in how they charge clients – now consistently rank among the top performing RIAs.

Our research confirms the same findings, and adds even more context. In a new survey of over 150 RIAs we conducted with Franklin Templeton and Institutional Investor, the majority of respondents said a great digital experience now differentiates RIA firms from their less tech-savvy peers and competitors. The same survey found those firms investing in tech are focused on bringing in tools that directly impact the client experience, including onboarding and account/holdings data management, day-to-day communication and client data analytics.

Consider it from a purely business perspective, if nothing else. If, by adopting tools like a CRM and client portal, you can provide clients with an experience that makes them happy and provides personalized service at scale, why wouldn’t you? 

In the face of hyper change, every growing practice needs to assess where and what they can reinvent to remain sustainable for the next decade and beyond. Every firm is unique, and how you reach your course of action will be too. 

Here, though, are five general points your firm can consider to prepare for reinvention:

• Go through your financials. Will you have the revenue flow to get you through the next 10 years? Can you afford to stay in business if you don’t change anything?
  
  
• Examine the clients you serve. Is the market that you’ve relied on up to this point going to be there in 10 years? What is going to change? 
  
  
• Assess your offering. Do you have the product and experience that will carry your offering into the next decade? What needs to be redeveloped?
  
  
• Revisit your mission statement. Do you have the vision for how you will get through the next 10 years? Are you still relying on an outdated perspective?