I was browsing the news the other day and came across several articles from ThinkAdvisor and Financial Planning Magazine, talking about the wealth management industry trends that will define 2016. As a former Financial Advisor, it sparked my interest, and I put together the most important ones.
I wanted to share this with you and hear your thoughts on it.
It’s less than a 5 min read, by the way.
Here they are:
1. Trade Mimicking
Young companies such as Covestor allow investors to copy trades of an investment manager’s own account – whether it’s a professional manager, friend, or a stranger with a good portfolio strategy.
Here is my thought on it – there’s an app for that!
Will the next generation continue to gravitate towards the a-la-carte investment approach?
Advisors of the future will need to be a gatekeeper of sorts to help these investors learn that investing is only the start of a very long journey in the wealth management industry. I’m reminded from back in the dot-com days where people would brag on how they doubled their money, and were outperforming major funds and advisors-only to find they went from $1,000 to $2,000 and shortly thereafter back to $250. For the time being and the foreseeable future, real money still means real advisors.
2. Financial Advisor Models Are Multiplying
It used to be simple: we were either part of a broker/dealer, RIA or bank, and we just adopted the firm’s or custodian’s exclusive technology package, which gave us a perceived edge and value above the rest.
As Financial Planning Magazine puts it, advisors can now be “part of an independent, captive, hybrid model, etc.“ This can make it harder to differentiate within the wealth management industry. Much of the technology has reached a point of saturation – with the exception of the advisor being able to add their logo and change the color scheme most client portals look and function exactly the same regardless of firm. It makes it harder to know your competition and if you cannot tell the difference then your clients may not be able to either!
In 2016, more than ever, firms need to customize more than just their website and go further and make a truly unique client portal experience that represents the advisory process and philosophy!
3. The Gen X, Gen Y Opportunity
According to Financial Planning Magazine: The real wealth transfer boom begins in 2026 when Baby Boomers start moving $2.5 trillion every five years. How will you adapt your practice to demonstrate your worth and capability to serve a new generation that relies more heavily on apps than actual professionals?
4. Online-Only Financial Advisors
Gen Y and X grew up living and breathing online and are, in many cases, more comfortable with the online world than the physical interaction. It’s also less time consuming communicating through phone, email, and video chat than setting appointments for a visit. As reported by Corporate Insight, some of the largest firms are already providing online advisor services, including large brokerages such as Charles Schwab, TD Ameritrade, and Fidelity. But will adopting these firm’s tech mean you cannot ever leave?
They hope so!
I get both sides – clients enjoy it and companies save money. How will this affect traditional advisors? Clients are catching on and eventually there will be a common expectation of technology for every firm, but if that’s the case how will you set yourself apart?
5. Artificial Intelligence Will Revolutionize the Wealth Management Industry
We have recently seen an advance in consumer data collection. Companies in various industries collect data about clients through social media accounts and online activity to predict and address life events accordingly. I’m sure you heard about that story a few years back when Target knew a high school girl was pregnant before her parents did.
I would not be surprised to see technology further develop in 2016 that will combine a personal assistant (like Apple’s Siri) with big data tools that informs advisors about life-changing events, such as job changes, marriages, divorces, births or deaths in the family.
This will certainly change the way you approach clients. Imagine knowing the perfect time to contact clients to update wills, account allocation, and trusts. You’d know your clients’ needs before they do! Now THIS is one change I am certainly looking forward to in the wealth management industry.
I hope you enjoyed reading my opinion on the wealth management industry trends in 2016. I would love to hear your thoughts on this! Leave a comment below. Do you agree with these trends? Are there other, more important trends that will define 2016 (besides robo-advisors)?