Wealth Management is growing at a rapid pace. Firms who can transform stand to benefit. According to Deloitte, the U.S. wealth management market reached $58T at the end of 2024, growing by 180% since 2017. They project the market to grow to $90T in the next 5 years with 45% of the growth attributable to high net worth investors with Gen X and Millennials moving into their peak income accumulation phase.
The expected growth and continued emergence of wealth within these two generations will create opportunities for firms that are transforming how they do business today while negatively impacting those who trail in transformation. Success will be dependent upon adopting a change management mindset and reimagining your business model to meet the evolving client requirements and increasing competitive pressures. It is also critical to leverage the benefits of emerging technologies to modernize client engagement and become a leader versus a laggard.
What is new about the problem?
According to McKinsey, in the next ten years, millennial and Generation X households stand to benefit from the transfer of $22 trillion of assets. It is becoming clearer most of this will be attributed to three transfers of wealth that firms should focused on – movement of assets from a 401K to a rollover IRA, movement between spousal and transfer to the next generation.
So, what is different now? It is simple – expectations. The transition to these demographic will redefine the service delivery model for advice and client engagement. Younger investors, shaped by digital fluency, expect immediacy, transparency, and purpose-driven engagement. They evaluate wealth managers not only on expertise and returns but on how they deliver an immersive experience to meet their more subjective needs.
How the competition is changing
Non-traditional providers are becoming even more non-traditional. Until now, competitive differences were based on regulatory structures – broker dealers, registered investment advisors, trust companies. We now need to consider the way in which services are delivered.
Robinhood, as a digital only provider, changed the way a generation looks at investing. Now we have the introduction of artificial intelligence based platforms which analyze the investors’ financial position including a full understanding of their tax situation, to develop financial plans and make portfolio recommendations. Will this lead to the elimination of advisors? Probably not. What does change is, how efficient an advisor can be and how holistic a plan can be. This clearly defines what hyper-personalization can really be and leads to a more scalable operating model.
Where do we go from here?
We know, successful organizations look at transformation as a journey and not a destination. No matter how well we are doing, we can always be better. Your competition is constantly working to win your clients.
What does all this mean? How do we get to the next stage? Developing a strong plan starts with a mindset rooted in change management.
Perform a 3600 review of your client experience.
You touch your client through multiple channels – online, mobile, telephone, print and more. Many times, the messages are inconsistent across the channels. There are also situations where the experience fails to meet the needs and expectations of today’s investors. You need to perform a multi-channel evaluation of how you engage the client. This would include a review versus all competitors – traditional and non-traditional and firms outside of wealth management who have innovative engagement tools. There also needs to be an assessment of what new technologies (e.g., data access, presentation tools) can do to provide future flexibility in delivery of innovation. These will be the inputs into your client engagement roadmap.
Reimagining Data Aggregation
A survey from McKinsey’s of Affluent and High-Net-Worth Consumers within the US found that today’s investors are looking for more holistic advice as they age, and their needs become more complex. They found the number of investors seeking more holistic advice grew from 29% in 2018 to 52% 2023. A plan that doesn’t consider all variables is incomplete and may not meet the long term needs of the investor. A full view of the client balance sheet which few platforms have without developing wide ranging integration is the only way to meet the client’s expectation. This functionality is turning from a differentiator to table stakes.
Become Agentic
Artificial Intelligence (AI) is advancing faster than any prior technology. Conversational AI is a good example of how AI continues to mature. While many clients may not be ready to work with an AI agent, properly trained, these tools have proven to be highly beneficial in analyzing client documents and delivering insights much faster. Clearly, all results require a level of validation, however, using Conversational AI to get actionable results quicker will add scale. Currently, we are highly dependent on reviewing reports and dashboards. We can expect this to be replaced by virtual agents who will not only determine the next best action, the agents will also could execute based on how it has learned.
Clients are changing. Are you?
Authored by:
Mike Tropeano
SVP. Client Engagement & Practice Management
Fi-Tek, LLC
