Hortz: What does your latest research say about the state of the overall wealth management industry in 2023?
Reddel: Wealth management is an industry that has been dealing with change for a long time. The way we see this is that we are somewhat midway through this reinvention from legacy advice models to new advice models. Increasingly, that seems to frame everything our clients are thinking about.
Overall, what we are seeing, even with all the market volatility, is that the industry is still a pretty resilient, attractive market for our financial services clients. They are increasingly investing in prioritizing the advice part of their business within their overall portfolio of client services recognizing that advice and the wealth management relationship is really accretive to the rest of their business. As an example, banks and insurers recognize that if they can lead with an advice or planning approach, their clients become a stickier, higher value relationship across all their products and services. This has become a durable perspective in terms of how our clients are thinking about the industry.
What our research tells us is that what continues to challenge the industry is the increasing demands from clients - what they are expecting, what they are willing to pay for, and the challenge just to deliver that from an effective cost basis. A lot of the operational and business model transformation happening today is being driven by these questions of how we deliver this and scale it profitably.
Hortz: What do you see as the growth prospects of the wealth management industry overall and what is driving it?
Reddel: We are seeing industry growth quite positively. The $128 trillion in intergenerational wealth transfer expected will be trickling through the industry and that is leading to prospect acquisition growth, a large shift in share of wallet, and where assets are flowing.
I think what is interesting is the shape of where that growth is going as we are seeing consolidation at the largest players. The independent space is also continuing to grow, but consolidating as well, so that the bigger independents are positioned for further success.
And then we have seen over the last two years, particularly with the Secure Act legislation, the real rise of workplace and retirement offerings and larger firms putting a concerted effort towards converting this area of opportunity into advice and wealth management relationships. That is a really interesting growth vector we are seeing.
Hortz: As global Wealth Management practice lead at Accenture, what has your group identified as major trends you believe will most greatly shape the wealth management industry in 2024?
Reddel: There are three key areas that our group has pinpointed and we are anchored in supporting our Wealth Management clients around them.
The first is longevity and the impact of people living longer, living differently, and the way they consume wealth management. The type of advice they need is pretty different and we characterize it as multi-generational advice. We publish an annual research report on this every year. We call it Life Trends and look at this theme as a decade of deconstruction. If you look at the traditional three-stage path of Work, Family, Retirement and how wealth and planning are anchored around that – the established path and thinking around it has really dissolved and changed with new generations. People are planning for different lifestyles. They are valuing finances and well-being differently. We are seeing the emergence of a radically changed set of services people want or need. As an example, there is a greater awareness of the “protection gap” between what people have in terms of life insurance and retirement protections versus how they have planned for that stage of their life. And so, we are seeing this different dynamic translating to actual real innovation and new retirement income products and strategies.
The second one is the rise of generative AI and the age of the “intelligent advisor” which is all about how we incorporate all this new innovation and technology into what and how advisors are doing things. That has been a really interesting one because of the buzz and demand and then applying it to workflows and the business overall. We are actively working with all of our clients to solve for this, not just mechanically or operationally, but in strategy and tactics. This is challenging to figure out as the accelerating pace of innovation for this and other technologies will continue to evolve. So, for many of our clients, much of the impact this coming year of 2024 will be operational. How do you allow advisors to be more efficient, engage with new technology, and reduce some of the risk and control issues that many may have? We see massive promise in terms of enabling true advice capabilities with clients and advisors engaging differently. But for most of our clients, the risks of regulatory action, the risks of security, privacy, and just the risks of fiduciary implications are putting a drag on that progress. So, we call that a major trend, but one that is a little bit less clear on how it will evolve.
The third one is the changing advisor workforce. There is a ton of data out there on the aging of advisors and the need for a new and more diverse workforce. But what we focus on with clients is building upon all of the research we are uncovering on the new job skills and approaches needed by a financial advisor are leading to a substantially different position and this is going to continue to evolve. So, for an “intelligent advisor” in the future, there is going to be much greater demand for coordinating a deeper level of advice through teaming, quarterbacking, and coordinating with a broader set of financial specialists within their organization, as well as a much bigger expectation to use digital and technology in different ways for their clients and build their relationships. Bigger organizations are already starting to push out a lot of new capabilities and tools to these advisors.