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Wealth Management 2030: Successful RIAs of the Future Will Look Very Different

In the past 10 years, the wealth management industry has changed significantly, but that was just a small taste of what’s to come. Looking forward to 2030 and beyond, disruptive new technologies, investment preferences, and demographic shifts will re-make the competitive landscape in which wealth managers operate. Firms that want to succeed in this new environment need to start planning right now –because acquiring and retaining clients in this new world will be a very different proposition, and require very different skills than RIAs rely on today.

The big question facing RIAs is this: in an increasingly commoditized world, with easy-to-use, self-directed brokerages, and shrinking costs to investors, how will you distinguish yourself, continue to grow, and justify your fees?

To set the stage, consider the broad, nearly all-encompassing changes just over the horizon.

Technology has the potential to disrupt nearly every aspect of today’s wealth management business. Consumer-facing financial technology (“fintech”) is growing by leaps and bounds: assets under management by direct-to-consumer robo-advisors could reach half a trillion dollars by 2023 according to Investment News–but that number could be higher “as more traditional wealth management firms invest in digital investment platforms.” Global robo-managed assets (institutional and retail) are expected to reach $6.2 trillion by 2027, growing at an annual rate of 13.5%.

Automation trends like artificial intelligence (AI) and machine learning (ML) are also growing at a breakneck pace. And while they may not replace advisors any time soon, they can potentially change the game by improving an RIA firm’s performance across a range of strategic functions, from alpha generation, to risk management, to operational efficiency (e.g., trading, reporting, and compliance).

Disruptive tech also has the power to reshape marketing and communications functions. Younger, tech-savvy investors are replacing older, more traditional investors. These new investors have very different priorities and preferences than today’s core advisory clients. A recent study by Fidelity found that more than 50% of millennials would switch advisors if their own advisor wasn’t using technology. In a recent survey by Aite Group, wealth managers cited enhancing their “digital client engagement platform” as their number one tech priority, by a large margin. These clients will expect more frequent, value-add, high-touch communications than even today’s most discerning clients.

Beyond disruptive tech, the wealth management industry also faces potentially seismic shifts in demographics, macroeconomics, and investor preferences.

Investors coming of age today are more attuned to shifting priorities like ESG, climate, sustainability, and fair-trade policies. Institutional investors are already making huge strides in these areas: State Street recently reported that global ESG assets comprise more than $30 trillion, and more than a quarter of the world’s professionally managed assets. RIAs will have to offer similar capabilities if they want to remain relevant.

On the macroeconomic front, as global growth patterns continue to favor emerging markets. U.S.-based investors will likely seek international investment opportunities, and advisors will need to become more adept at global investing. In the hunt for alpha, domestic investors’ appetite for greater exposure to global equities could radically shift the model portfolios of today.

The recent Game Stop/Robinhood fiasco points to an emerging trend among younger investors, toward higher risk tolerances and an appetite for more esoteric vehicles. New technologies, like low-cost investing apps, will democratize capital markets and enable millions more people to participate in options trading, alternative assets, and other esoteric strategies. Thus, the successful RIAs of2030 will have to provide clients exposure to unique and differentiated investments outside of the plain-vanilla equity and fixed-income model portfolios that dominate the landscape today.

Add up all of these shifts and it paints a picture of a very different wealth management business: RIAs will be serving very different types of clients, with potentially radically different objectives, preferences, and expectations than clients of today. The industry will also be challenged to address a radically different value proposition and competitive landscape, with RIAs forced to compete on all fronts against cheap, sophisticated automation.

So, what will an RIA need to offer in 2030 to attract new clients and grow assets? Successful RIAs will need to deliver a more value-added, high-touch service than any robo-advisor or automated platform could possibly offer.

First, we believe that RIAs will need a differentiated in-house asset management solution to remain relevant. The premier advisor of 2030 must offer clients more unique, actively managed, bespoke “alpha-seeking” investment strategies, because the trend is moving away from low-risk, low-cost, diversified passive investing. The latter is easily automated and those clients will likely end up migrating to AI-driven tech platforms, leaving open a market for RIAs to deliver customized strategies with higher excess returns.

An RIA’s asset management capability will likely include custom investment vehicles, which not only reduce expenses for clients but also capture revenue for the firm. It will also likely include expanded access to “alternative” assets (e.g., private equity, private real estate, hedge funds, etc.) for income enhancement, non-market correlated returns, and risk management. And it’s extremely likely that bespoke asset management capabilities will have to include in-house socially responsible investment solutions in order to attract millennial clients who will be the millionaires of 2030–i.e., environmental-social-governance (“ESG”) or values-based investing (“VBI) solutions.

As for communications and client service, a high-touch relationship –often driven by social media and other digital communications–will be key.

The industry will see an increased focus on robust client portals and client-facing content. The last few years have brought an emphasis on written content, and by 2030 that emphasis will shift again, with multi-media content becoming “table stakes” for premier RIAs. Advisory firms will need to exploit multiple communications channels like engaging Twitter feeds; regular and frequent market insights by text; video, audio, podcast, and other proprietary delivery channels; and higher emphasis on mobile technologies. Finally, like it or not, daily content delivery could very well become the norm, as a more digital-savvy, engaged, high-net-worth client base supplants the more traditional HNW clients of today.

Looking just beyond the horizon, it’s easy to see how radically different the wealth management industry of tomorrow will be. Clients will have much higher expectations of advisors and RIA firms who must justify their fees against digital platforms that offer inexpensive wealth-management solutions to the masses. In return for those fees, HNW clients will demand a robust capability to deliver custom strategies and vehicles, as well as a radically expanded and refined client experience that takes advantage of a wide array of communications technologies.

For leading RIAs that hope to grow in the next decade of the 2030s, these won’t be “nice-to-haves,” they will be “must-haves.” So, if you want to be a winner in this new world, best start building now.

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