Aite Group, a global research and advisory firm focused on the financial services industry, recently held a webinar discussing what it identifies as the top wealth management trends in 2020. There were many items on the list, but we'll cut to the chase here by focusing on three trends that seem particularly germane to the bulk of our readership.

Regulation Best Interest
Regulation Best Interest will take effect this June. Adopted by the Securities and Exchange Commission the previous June, Reg BI requires broker-dealers and associated persons to apply a so-called best interest standard of conduct when making recommendations to a retail customer of any securities transaction or investment strategy involving securities. It also mandates B-Ds to fully disclose material facts about conflicts of interest regarding their recommendations.

“I think 2020 will be a testing ground for Reg BI, and it might go over into 2021,” said Greg O’Gara, a senior research analyst for Aite’s wealth management practice.

He noted that smaller B-Ds have smaller budgets and less access to legal and compliance resources.

“As these firms come to terms with Reg BI we think they will seek cost-effective solutions. To that end, we see OSJs (office of supervisory jurisdiction) increasingly acting as consultants and more or less becoming a compliance layer for these brokers,” O’Gara said. “We also see more traditional legal providers moving into Reg BI consulting.”

He added that client confusion over Reg BI will be a “pain point,” but ultimately it’s something that will lead to greater awareness of the fiduciary model.

“In that respect, we think RIAs will actually benefit from this greater fiduciary focus,” O’Gara said.
Elsewhere in 2020, he expects continued scrutiny of the B-D business model as state legislatures continue to debate consumer protection laws.
Supporting Client Longevity
Dennis Gallant, a senior analyst for Aite’s wealth management practice, said that despite the attention paid to millennials, baby boomers are still driving change and remain a prime focus in the wealth management marketplace. And much of that is tied to longevity planning, an umbrella term encompassing services and support centered on retirement planning and wealth transfer.

“This isn’t a new service, but what’s different is the volume of retirees,” Gallant explained. “Wealth managers are facing greater challenges in creating income streams to meet clients’ needs and wants against various risks including longevity and inflation and healthcare.”

He noted that handling the deaccumulation of assets over a retirement period of 20 to 30 years is a different discipline than working with clients during their asset accumulation stage.

“[Deaccumulation] requires a much deeper discovery process to really understand and flesh out the expressed and unexpressed expectations clients have in retirement,” Gallant said. “Advisors will need to be much more skilled in addressing those needs and having—what are in many cases—difficult conversations."

He offered that long-term retirement planning will involve more complex products and support on the non-traditional side including annuities and other guaranteed-income solutions.

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