Between changing investor demands, a global pandemic, and advancements in technology, the past few years have brought profound change to the wealth management industry.
Many of these trends existed pre-COVID-19, but most agree that the virus radically accelerated them, ushering in an inevitable future. Asset managers focused on building relevance and trust in this radically altered environment during a recent session at Nicsa’s GMM.
Michael Galkoski, National Sales Manager, US Wealth Management at American Century, moderated the event, which featured leaders from Envestnet, LPL Financial, and Morgan Stanley.
Sterling Shea, Managing Director, Head of Practice Strategy, Wealth Management at Morgan Stanley, highlighted two industry trends that have become realized far sooner than expected:
- A change in wealth management’s fundamental value. “We’re moving away from a value proposition historically predicated on access to markets and financial product toward a proposition that’s more centered on stewardship and the delivery of authentic and holistic advice,” Shea said.
- A shift from a performance-driven, benchmark-oriented process to a client-driven, outcome-oriented solution. “As the advisors that are providing deeper, more meaningful engagement create an elevated, more elegant client experience, we think they’re going to rapidly accelerate their capture of growth,” Shea said. “Clients, coming out of the pandemic, will be more empowered to judge the quality of the advice they’re receiving, and that will expose mediocrity.”
Steve LaChance, Senior Vice President, National Sales Manager, Advisor Solutions at LPL Financial, said it’s often a challenge for advisors to find the time to evolve.
“That’s where we, as an industry, can help,” LaChance said. “We talk a lot about efficiencies and segmentation — although those words are important, they don’t tend to land well. We have to reposition the challenges advisors face and help them find time to address them.”
The key, LaChance said, is models-based investments and the adoption of technology.
“At the same time, we talk about how the value prop has changed: Clients want more, but they don’t want to pay for more in many cases — in some cases, they want to pay less,” he said. “We have to find a way to drive efficiencies into the advisor’s practice to allow for a sustainable practice.”
Shea agreed.
“Those advisors who are able to apply strategy — who are moving from working ‘in’ the business to ‘on’ the business — are going to win hugely in the years to come,” he said. “It’s all about driving efficiencies in the investment management process around new business development, client engagement, and service models.”
Panelists also stressed the importance of technology in shaping business models and enhancing the client experience.
“Technology is definitely driving efficiencies,” said Jean Heath, Managing Director, Head of Asset Manager Network at Envestnet. “Taking advantage of all the data that is available today — and the ability to aggregate and incorporate it into the overall client financial plan — helps advisors provide much deeper, more meaningful planning and experiences to their clients.”
Generational Considerations
Heath said the pandemic has caused digital engagement to spread across most generations, but younger generations show a greater appetite for it.
“They’re more open to the use of technology in opening accounts, transferring money, and the adoption of things like cryptocurrency,” Heath said. “The newer generations aren’t as afraid of technology; they’re looking to embrace it, and that will be a critical way in which you serve that client base, or you will not be able to attract them.”
Shea said older generations are looking for advisors to become stewards of long-term generational wealth — think legacy protection, the value of estate planning, and sophisticated wealth transfer approaches.
“That group of clients, which is still the bread-and-butter of the industry, is taking a broader perspective about what is going to happen with their children, their legacy — and that has been accelerated by COVID as well,” Heath said.
Note: Although the observations contained in this work represent the best thoughts of the individuals comprising the Nicsa panel, they do not necessarily reflect the views of Nicsa or any of its member organizations. Matters addressed in this work may touch upon legal or regulatory matters, however nothing herein is intended to be or should be construed as legal advice. You should contact your own counsel in order to obtain legal advice regarding these or any other matters.
#NicsaEvents