The Securities and Exchange Commission introduced Regulation Best Interest in June 2019, which sets a best interest standard for brokers. While large b/ds are in progress of making systematic changes to meet the June 2020 compliance deadline, smaller b/ds are mulling over the best ways to comply.

Aite Group expects larger b/ds to take on the new regulation with more ease than smaller ones. Large b/ds have the money and in-house counsel to meet the SEC’s demands. Smaller b/ds, on the other hand, don’t have the same resources and will need assistance from outside counsel. Either way, new technology will crop up for large and small b/ds. Several vendors have been marketing products and services to help reps and advisors comply with Reg BI. The products’ main functions involve digitizing rep-client conversations and analyzing digital conversations for compliance violations, Aite says.

The costs of Reg BI technology is causing some large b/ds to focus less on small accounts and give more attention to large ones. However, Aite Group believes this will be a windfall for robo advisors. The company also thinks this might kickstart another reason for small brokers “to seek the cover of large broker/dealer integrators and super offices of supervisory jurisdiction.”

The move to zero commissions operating has shaken up the wealth management space; it lead to TD Ameritrade losing revenue and having to sell to Schwab, Aite Group said.

Aite expects it to lead to more consolidations among brokerages, and commission-centric brokerages will have to create value in new ways. Aite Group predicts many firms will market their new commission-free trading, but then promote services such as digital investment management, turnkey asset management programs that come with model portfolios and access to investment themes like ESG (environmental, social and governance) for a fee.

Zero commissions have also shaken up asset management, a space that’s was already facing a trove of industry changes. Investment products are becoming more readily available to investors and advisors; asset managers are also faced with fee pressure and declining margins, so the shelf space that some large managers held on no-fee-trading platforms has diminished. And it’s placed them on “equal footing” with fund managers who could not afford to work with major custodians. Aite predicts this will push asset managers to have their series of consolidations.

The big wealth transfer is in process. Over the next three decades, baby boomers will reportedly transfer an estimated $30 trillion to the next generation. Dennis Gallant, Aite Group’s senior analyst, says advisors risk losing out on the transfer if they have not incorporated longevity planning, which includes engaging clients’ children, grandchildren, and elderly parents. It also includes advanced services and tools that can handle estate planning, tax planning strategies, and considers Social Security and income withdrawal.

Health savings accounts are expected to be a core benefit option akin to an employer’s defined contribution or 401(k) offering. Though it’s usually provided alongside high-deductible health insurance plans, Aite sees the industry adopting it as another retirement savings vehicle because of its growth potential and ability to help with healthcare costs in retirement. Before that can successfully happen, Gallant reports there are a few hurdles for the industry to get over. For one, there needs to be an overhaul in how employees understand health savings accounts and regulatory changes to contributions. Retirement plan advisors will have to work out what type of compensation model for this best supports their business.

Gallant also sees more advisors turning to financial institutions and large wealth management firms for home-office support and guidance in areas where they lack knowledge.

There was $5.8 trillion in defined contribution plans in 2019. To prevent them from going to financial advisors in rollovers, DC providers wised up to the likes of digital advice. Vanguard launched DigitalAdvisor in 2019; Principle launched Simple Invest; and Apex Clearing launched Wealthsimple in 2018. Digital advice platforms allow DC providers to establish better relationships with clients and maintain those relationships.

“Keep an eye out for competition from these plan providers,” said Eric Sandrib, research associate at Aite.

Until now, the industry has seen wealth management firms like the Carson Group go into business with the tech company Galileo to launch a mobile-only banking service. Then there was Focus Financial that offers banking products for cash management and mortgage loans. Aite sees more wealth management firms adding value through banking services in 2020 and beyond. The firm expects to see product offerings expand beyond cash management, especially with the proliferation of banking-as-a-service and middleware creating more opportunities for advisors to work with banks and clients with lower assets.

In Aite Group’s survey of 20 wealth management firms across Asia, it found a common sentiment of uncertainty surrounding the U.S. trade wars with China and the anti-government protests in China. Private clients are watchful of possible risks in regions under certain jurisdictions. These events are creating instability in China and its economic jurisdictions. High-net-worth and ultra-high-net-worth clients are moving portions of their assets to markets such as Singapore, Taiwan, South Korea, and Japan, where there are more wealth management services and more stable economies to “mitigate jurisdictional risk.” However, Aite doesn’t expect a “capital flight from Hong Kong” to occur in 2020.

Instability such as what’s occurring in Asia can present an opportunity for wealth management firms with a presence across that continent. Aite analysts report that booking centers could open new accounts for clients in other parts of Asia “thus showcasing their strength and potentially gaining new assets.”

Increasing regulation, new technology, and changing customer expectations have lead to an unstable market. The pressure has forced banks to “sharpen their business” according to Wally Okby, a senior analyst at Aite. He foresees banks hiring relationship managers and advisory personnel in target markets to better support clients. Okby also thinks banks will try to bolster organic growth in strategic regions. As for investment solutions, the year ahead may see banks install “investment solutions teams” as a support to their revenue generation. They’ll also become more accepting of crypto assets in the wealth management channels.  Two banks in Switzerland, Mark Baumann and Falcon Private Bank, have already begun to accept crypto-generated funds. On the corporate management side, departments will focus on banking platforms and operating models that are modern and allow the bank to scale.

Aite predicts a sharp increase in socially responsible investing in 2020, with more firms expected to launch solutions of their own. Vendors will want in too and will seek to incorporate environment, social and governance/SRI into their products.

Expect to see development in the number of ESG options in retirement plans, streamlined terminology to decrease investor confusion, more accessibility to ESG-scoring tools, increased interest from investors that’s accelerated by the news and social media, and companies to become more aware of their ESG reputation and the potential decrease in market capital.