Some of the newest technology and some of the oldest pillars of wealth management are among the essential trends for advisor growth in 2024, according to Envestnet.
The firm's market intelligence team has drawn on its own data, market data, and third party intelligence to provide an analysis of the key drivers for successful advisory businesses in the coming year amid a reshaping of the financial advice industry.
First, fully integrating technology and ensuring that the tools and solutions being used are enhancing the advisor and client experiences. Among the priorities are integration of client engagement tools and improvement of custody workflows.
"The wealth management market has long faced challenges with fragmented technology and inefficient workflows," said Chris Shutler, head of strategic development and market intelligence for Envestnet. “Increasingly, we've seen more of our clients looking to consolidate and streamline the technology and solutions their advisors utilize, to provide a more unified experience for customers and make it easier for them to do business."
The report highlights that it is human advisors working with technology that is the winning combination rather than robo-advisors, which represent just 2% of industry assets.
Second, taking a holistic approach and providing value beyond investments such as estate planning, tax advice, loan and credit management, life insurance, and health planning.
“From an investment perspective, advisors have the potential to add 300+ basis points in annual value for clients, particularly through tax-efficiency and behavioral coaching,” the report says.
Third, the opportunity that retirement presents. Those advisors who are not retirement experts can gain by leveraging technology and assisting small and medium sized enterprises who may find it hard to offer financial wellness and retirement solutions to their employees.
Fourth, using artificial intelligence and data to provide personalized service, enhance client interactions, and improve efficiency. Envestnet research found that 60% of advisors see the potential for data aggregation and next-best-action insights to improve their business or advice to clients but have yet to implement them.
Fifth, the potential for growth in alts in the retail segment. Individual investors represent only 16% of global AUM held by alternative funds. Retail adoption will increase as asset managers increasingly target the individual market, and as firms continue to test and learn when it comes to providing appropriate liquidity mechanisms.
Finally, managed accounts as a preferred choice as clients migrate away from commission-based options to fee-based accounts. Envestnet expects UMAs to remain the fastest growth area of managed accounts as they allow multiple investment vehicles to be combined into a single account for a unified view and customized client solutions.
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