As we enter the New Year, financial advisers are probably asking themselves about the strength of the recovery and whether their firm is positioned to capture new clients and talent.
These are important short-term issues, but wealth managers and their organizations also must take a longer-term view.
To help start thinking and preparing for tomorrow's business-changing forces, here are a few examples of innovations and changes that wealth managers soon may see.
Trust through education. Regulation alone will not restore investor trust in financial institutions. To win over skeptical and badly burned investors, wealth managers must invest in client education that is relevant, understandable and delivered at the right time via the right media.
Some organizations may find providing such education burdensome, but firms that understand technology and the ways clients prefer to consume information may find real opportunity. Some investors may want interaction via smart phones, for example; others may prefer an iPad or a Kindle-type device. Some may prefer paper but also wish to access information through video.
Whichever medium is used, clients will want straight talk. As a result, providers who learn to outline products, services and risk in simple language could have the most success. Call it trust through simplicity and connectivity.
Multidimensional fiduciary responsibility. Tighter fiduciary requirements are coming, which will lead to clients' wanting to know how investments best fit their financial plan and whether their adviser understands their needs.
Technology exists that could help. Soon we may see tools that devour data in real time and analyze the entire universe of investment products to find the best fit for an individual's changing investment profile. The tools will reflect actual performance and the latest research, while also monitoring portfolios so they remain compliant with investment objectives. Should a red flag appear or better options present themselves, the system will alert the adviser and the client.
Using technology this way hyper-focuses the adviser on the client by automating the most time-consuming parts of the advisory job, freeing advisers to build new business and retain existing relationships.
Managing wealth anywhere. In an “anywhere” world, providers must reconsider laborious client communication and reporting practices. These static exercises have the potential to become dynamic, collaborative events where current and hypothetical portfolios are run and stress-tested in front of the client's eyes. For the advisers who master them, software for iPads and other mobile/tablet devices and even home TV screens will enable frequent, engaged interaction in any setting.
Facebook nation. Social media has the potential to be a tremendous agent of change, opening new doors for prospecting, client interaction and building referral networks.
Given their legal restrictions, wealth managers should consider building environments that stand alone or joining established social-media platforms to communicate in constrained ways, such as hosting affinity groups and private discussion forums, and surveying and monitoring user preferences and activity.
But let's ask an even bigger question: What's stopping a social-media platform from selling financial services? Sure, products likely would come from a traditional provider, but don't you think a fair number of people might opt for a Facebook financial account? Given the financial industry's loss of trust, it's possible that a peer-to-peer financial services environment could arise, posing unique challenges to advisers and providers.
Information may not be free. Higher yet on the scale of business disruption is the prospect that certain consumers will decide to create a buyer's market for their personal and financial identity.
Individuals could develop a profile enabling them to shop among the universe of products while also permitting providers to approach them based on limited public identifying information. Tools for investment analysis and guidance would be for sale. For another fee, individuals could shop for or be provided a fiduciary representative. How would your organization survive and thrive in such an opt-in, opt-out environment on steroids?
The ways that technology, cultural developments and regulation may shape the future of wealth management are indeed broad-reaching. While you can't predict or control the future, thinking creatively now about these scenarios — as well as your organization's potential responses — could very well determine your long-term success.
Alvi Abuaf is a partner and practice leader of the North America Wealth & Investment Management Group at Capco, a business and technology consultancy specializing in financial services.