Category : 2021 Midyear Outlook.

While turbulence in the markets is nothing new for wealth and asset managers, the bumps encountered over the past year lead to several industry changes that could become permanent. So how can managers future-proof their practices? Here are some of the actions clients and industry participants are taking now to capitalize on tomorrow’s opportunities.

Taking a deeper dive into ESG and outsourcing. ESG continues to be one of the brightest spots in the industry – attracting assets, media attention and regulation. While environmental concerns get the majority of attention, social and governance aspects are factors as well.

Some investment leaders are looking at their own firm’s social responsibilities with a greater focus on employee wellness, burnout, and mental health. However, as the lines between home and work blurred, 50% of respondents to a 2021 CFA Institute survey say they are not committed to the industry. Moreover, commitment and tenure is shaky in IT and operations roles, which have a wide range of opportunities available outside of financial services in younger, less traditional industries. With historically higher turnover, critical operations roles should be prioritized with greater attention and support.

To bridge this gap and supplement their operations functions, firms are increasingly looking for specialized outsourcing partners. By partnering with operations experts, wealth management firms can outsource critical repetitive tasks and reduce employee strain and broader organizational risk. In addition, location flexibility and improved collaboration tools make this more accessible than ever, enabling core employees to focus on servicing and growing their client base.

Furthering client communication and digitalization, which significantly accelerated in 2020. Per a 2020 McKinsey report, advisor loyalty was tested as money was ‘in motion’ at a rate 3.5 times greater than at pre-pandemic rates. In addition, respondents who transferred a significant amount of money cited an existing relationship and a better digital experience as the top reasons for transferring assets.

According to a J.D. Power survey, wealth management mobile apps usage increased accordingly in 2020, but satisfaction with the mobile experience lagged behind other consumer financial apps. With increased interest and use of wealth management apps, particularly among millennial and Gen Xnvestors, firms would be wise to focus on their digital offerings and self-service options to complement their higher-touch services.

Connecting source systems and their data to enable knowledge workers in their preferred location. Timely and accurate information has always been one of the most valuable resources for wealth and asset managers. However, getting it from the source to the consumer hasn’t been easy or cost-effective. The rapid technology changes of the past several years enable greater adoption of open APIs and advances in artificial intelligence, such as machine learning and robotic process automation.

As a result, firms can now offer efficient, frictionless, contextualized information for each user in their preferred system.

Connected workflow examples include:

  • Client servicing teams have client demographic information at their fingertips in the CRM system and performance, holdings/cash, and recent trades from the accounting and order management system.
  • Research analysts’ model changes flowing directly to portfolio managers for account rebalancing, which then flows directly to trading for execution.

While the wealth management industry was ripe for digital disruption before the pandemic, the dramatic shifts of 2020 have brought about rapid advances in technology and new, forward-thinking business models. Instead of trying to put the toothpaste back in the tube, the most successful firms will recognize the opportunities of tomorrow and seize on the rare chance to implement superior policies and platforms.

By Matt Ahlstrand, Vice President of Product Management and Solutions Consulting, SS&C Advent