“The days of the true globally active wealth manager are coming to an end,” the report states; numerous examples of wealth management firms cutting back on international expansion (witness Morgan Stanley selling EMEA wealth management business to Credit Suisse, or Barclay’s decision to scale back from serving clients in 130 of its 200 jurisdictions.) More of the same in 2014, Aite says, including more market exits and a focus on specialized niche wealth management services.
Since the financial crisis, the report states, wealth management firms have largely been in reaction mode. That will change in 2014, Aite predicts. Look for innovation around using tech to improve client “experiences” (and using their data to drive profitability), digitally targeted client acquisition using content-based marketing, and more partnerships and crowdsourcing among industry players to solve common problems.
“Firms that are still struggling with data consolidation and access will be at a disadvantage compared to firms that are monetizing” the information, Aite says. Expect traditional wealth management firms to emulate online brokerages in gathering and analyzing customer data to sell new products or position new strategies. Data companies outside the wealth management field that will benefit: IBM/SPSS, SAS, Teradata, and Oracle. Tech providers with specific wealth management implementations include Opera Solutions and QlickTech.
Most firms are claiming to embrace “goal-based planning,” but those that mean it will find their footing in 2014, the report says. Because clients are increasingly educating themselves via the Internet, wealth management firms need to “insight-sell,” or give advice based on a clients’ “investment personality,” according to Aite. That also means investments in enhanced client portals and mobile tools, not just for performance reporting but for financial planning. 2014 will also see enhancements to CRM platforms.
Most financial advisors with a good online client portal will say it saves them plenty of time answering client questions about their portfolio, Aite found in a survey. Savvy advisors are already transforming their client portals away from a customer service tool and into something that helps with “client integration.” Yodlee, CashEdge, Strands Finance, and BP Analytics, are seeing an explosion of business coming from wealth management firms, while Balance Financial, Oranj and WealthAccess have created platforms for smaller advisory firms.
Large wealth management firms are finally getting serious about integrating the disparate applications advisors use and stitching them up into one platform. Morgan Stanley and Merrill Lynch have taken the step; At other firms, Envestnet and Folio Dynamix are the center pieces to unify advisor workflow, while at RIAs, CRM tools like Salesforce.com are seen as the central point of integration, according to Aite, and each should do well in 2014.
Clearing firms, traditional wary of supporting non-brokerage business of advisors, are quickly becoming more integration oriented and providing tools that can more easily run across a corresponding broker’s workflow. Pershing and National Financial Services have been at the forefront of this trend, according to Aite.
The SEC moved its goal of a fiduciary standard from high priority to long-term “nice to have” over 2013, while the Dept. of Labor is pushing for its own standard. Aite Group expects a standard to emerge in the next few years, but it will unlikely bring significant changes to the way advisors are paid. Interestingly, Aite thinks commission-only models may move to the web, where algorithms will deliver unbiased advice (SigFig, Future Advisor, and Financial Guard are a few of the companies in the vanguard here, according to Aite.) More advisors will move to charge clients for advice.
“Since 2011, the rise of mobile trading has become noticeable (9% of DARTs in 2013), but within the next three to five years it is set to reach a virtual tie with Web-based, non-mobile trading as the most important front-end technology. An Aite Group survey that included seven of the top 10 U.S. retail brokerage firms in November 2013 reveals that brokers expect to see mobile trading's share of DARTs rise to 21% by 2016 and to 38% by 2018,” Aite says.
“A growing number of financial and private equity firms are joining Bitcoin-mania, and it is tempting to call this digital currency a hot trend. Given the formidable obstacles that stand in the way of sustainable growth for this praised and much maligned virtual currency, however, we place bitcoin in the "hoopla" category,” according to Aite analysts.
Aite Group is out with its annual list of top predictions for the wealth management industry. Here, according to Aite, are the ten most significant trends you’ll deal with in the coming year.
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