We’re not saying we’re in the same league as, say, Nostradamus when it comes to predicting the future, but the team at InvestmentNews has a pretty good idea of what advisors should be on the lookout for in 2023.
Many of the technology companies serving the wealth management industry may find themselves performing a balancing act in 2023: diversify services while remaining nimble enough to meet changing demands of financial advisors.
The S&P 500 was down about 20% in 2022, translating into less revenue for many, if not most, advisory firms. While completely cutting technology budgets isn’t a viable option, advisors will be taking a closer look at expenses and where they can cut out fat.
To prove that they offer business-critical tools and services that firms can’t live without, fintechs may find themselves mimicking some of the same strategies advisors use to demonstrate the value they bring to clients during difficult markets.
For example, just as many advisors now offer “holistic advice” services beyond traditional investment management, the established fintech companies will continue to expand beyond their original products in the name of integrated digital platforms. This has been going on for years — Orion Advisor Solutions, for instance, brought client relationship management software into its ever-growing technology ecosystem in April by acquiring Redtail CRM. But it’s a trend that is likely to accelerate.
Look no further than Riskalyze, advisor fintech that began as a digital risk tolerance assessment, exploring a new company name that better captures the range of products it provides.
This will drive increased consolidation as the big-name advisor fintech companies look to deepen their value to financial advisors and diversify their revenue stream.
But anyone can spend money to acquire new capabilities; the real winners will be those that can most efficiently integrate the pieces together. In a recent study by Advisor360, just 3% of financial advisors described their technology as “integrated and innovative.” While some advisors will always want to pick and choose their favorite applications, there’s a growing exasperation with fintech companies providing individual point solutions that don’t work effectively with each other.
Fintech companies, turnkey asset management platforms and custodians both big and small — with the latter hoping to seize on disruptions caused by the Charles Schwab-TD Ameritrade merger to win over advisors with promises of better tech — will all be working their hardest to prove their integrated, end-to-end platforms are more integrated and more end-to-end than the competition.
At the same time, 2022 just proved the value of flexibility. Cryptocurrencies crashed after years of skyrocketing valuations and consumer demands and could soon face new regulations, while rising interest rates made cash an attractive asset class for the first time in more than a decade. Don’t be shocked if companies this year announce “pivots” to new areas or pull back on previously announced projects.
To read more articles in this series:
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Yari Capital's move to Carson continues a run of additions for the $62 billion firm, days after it hired a veteran recruiter from Osaic.
Servo Wealth Management's $210 million book brings the Minneapolis consolidator's total client assets further past $160 billion.
Northern Trust’s Ken Lassner shows advisors how to convert volatility into after-tax portfolio gains
Dan Biagini of American Equity says the steady decline of pensions, longer lifespans and a reset in interest rates are rewriting how advisors build retirement income
