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This may well be the year in which the “new normal” becomes “normal.” But, as we observed in our mid-2021 outlook, many changes wrought by the pandemic are likely here to stay. Here’s how we see firms adjusting to some of the key themes we’ve been tracking this year.

Digitizing client communication and team collaboration: Remote work, dispersed teams, and new client contact channels redefine the wealth management operating model. Unfortunately, we see the gap widening between firms adapting to these changes and those failing to do so. Firms need to take a hard look at their core systems—portfolio management, accounting, trading and CRM—to ensure they can scale, connect, and serve the data necessary to a digital transformation. Remote work has also made cyber threats a top-of-mind concern. A scalable, secure, and reliable technology stack can be a real differentiator in asset retention and attracting new advisors. The short-term stress of implementation should not be a barrier to new technology adoption.

Outsourcing gets human: As the adoption of cloud-delivered technology gained momentum in 2021, we saw an uptick in outsourcing around human capital needs, as firms experienced higher turnover in operations and turned to external expertise. Still, some firms are waiting for a catalytic event—a daunting upgrade, the loss of a critical person, or expansion into new markets, products or distribution channels—to get them off the fence. Outsourcing and managed services hold the answer not only for rising costs and margin pressures but for strategic agility and scale. For many firms, the question is no longer “whether” to outsource, but rather “when” and “what” makes sense to outsource. The “Great Resignation” of 2021 has shone a light on the possibilities.

ESG and direct indexing continue to drive conversations: ESG will become even more of a dominant theme in wealth management. While disparities in ESG ratings remain a source of confusion and concern, standards and guidelines are starting to emerge to help advisors better understand ESG and explain it to their clients. Regulations around ESG reporting are going into effect in Europe, and the SEC’s “Climate and ESG Task Force” should help protect investors against “greenwashing.” Investment activity rewarding and encouraging responsible corporate citizenship is a good thing. Technology will illuminate ESG and enable more portfolio managers to implement direct indexing, which helps make portfolios “stickier” for advisors. These innovations to further support investor goals will be exciting areas to watch in 2022.

Success goes to firms making smart use of technology: The most successful firms continue to utilize innovation to scale their businesses across the board. We see examples of advisors becoming more client-centric by integrating more intelligent CRM systems with portfolio and market data. They use automated portfolio management tools to build more personalized portfolios with less manual intervention; and connect with clients through their preferred channels—portals, mobile or video chat—to ensure adherence to their preferences and goals. Above it all looms the cloud, which enables scale, remote access, system and data redundancy, security, and operational flexibility. Indeed, the past two years’ experience has brought us closer to the day when the cloud becomes “normal” for wealth management operations—perhaps the most enduring change of all.

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