After enjoying the fruits of a robust market through the first three quarters of last year, wealth managers may be hunkering down in 2019, according to the Aite Group.
In a report forecasting the top 10 trends in wealth management, the research firm said firms will be busy "future-proofing" their businesses.
"2019 will see wealth management firms accelerate changes in their business model and technology," the firm said.
This year may be particularly significant for wealth management firms as they reposition themselves for the inevitable market correction that will replace the current record-length bull run, the report said.
Below, in no particular order, are the Aite Group's top 10 trends in wealth management for 2019.
Fees Are Compressing
Financial advisors will respond to a changing marketplace by implementing competitive fee arrangements. Product manufacturers will also be pressured to respond to consumer demand through technological advancements for greater transparency and access.
Strategic Product Partnerships Are Changing
Broker-dealers will seek to maximize their partnerships and revenue arrangements with mutual fund companies through scale or consolidation. Firms with sufficient scale will partner with broker-dealers and wealth management providers, while those that do not will consolidate.
Home-Office Models Come Into Focus
Financial advisors will outsource their role in managing assets to home-office and third-party models. Overall, the rise of model portfolios will continue to shift the roles and points of influence for portfolio construction and investment management.
Millennials Lead Move To Sustainable Investing
Offering clients investment opportunities that make them money and are responsive to their beliefs and interest is becoming more important, particularly with millennials. As a result, wealth managers will increasingly offer sustainable and impact investing as a mainstream service.
Retirement Planning And Decumulation Gain Prominence
Financial advisors will provide clients with real-time, comprehensive planning services focused on retirement planning and decumulation of wealth they have or still are saving or investing for this stage of their lives.
Digital Is Considered Firm-Wide And Strategic
Wealth management firms are redefining their digital strategies to market financial planning services to a broader client base. Firms with an integrated digital strategy are raising the bar and will force more wealth management and asset management firms to accelerate their digital efforts.
The Hybrid Model Is Defined And Refined
Many firms will shift from a hybrid platform to a high-touch hybrid platform during 2019. However, it is crucial that financial institutions include growth goals and revenue targets with their hybrid model for it to be successful.
Data As A Differentiator Takes Center Stage
It is imperative for firms to turn big data into bite-sized information that is relevant to each client, as well as knowing each client’s likes and dislikes. As a result, firms will use data as a differentiator to minimize customer churn, fraud and default risk.
The AI Road Entices, Confuses And Elicits Glee
Financial institutions will expand the use of AI, but remain trepidatious of the new technology. Given the newness of AI tools, groups will continue to debate, evaluate risks and negotiate internal resources to more effectively learn how to utilize this emerging technology.
APIs Inflict System Change
Vendors to the wealth management industry are increasingly delivering their capabilities through APIs as a new model of access to platforms. This new model of access presents challenges that may significantly alter firms’ competitive position, economic model and stickiness with their clients.
