Invest in Tech or Be Left Behind

A new report by ThoughtLab, Deloitte, and FNZ indicates that a global tech shift is coming. Ignoring it could leave wealth management firms struggling to catch up.


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The world is changing, and wealth management needs to change with it.

Nearly 70 percent of investors want the same digital experiences with their investment providers that they get with other born-digital companies, according to a report by ThoughtLab, Deloitte, and FNZ. The number is even higher — 74 percent — for those in Gen Y or Gen Z.

The new research, which was conducted with support from Amazon Web Services and Genesys, suggests that wealth management firms will need to reinvent themselves to succeed in coming years or face the consequences.

“To thrive in the next era of investment, industry executives need a clear view of the future expectations and behaviors of worldwide investors and what providers plan to do to keep them happy,” Louis Celi, CEO of ThoughtLab and director of the study, said in a statement. “Our research shows how firms need to rethink their products, services, processes, business models, and digital strategies to become future ready.”

The companies conducted two global surveys between September and November of 2023. One study surveyed 250 senior executives at wealth management firms, and the other surveyed 2,000 investors across ages, wealth levels, and countries. The report also includes insights from an advisory panel of wealth management experts and interviews with senior practitioners.

More than half of the senior executives surveyed said that born-digital firms were going to transform the wealth industry, with 69 percent of executives believing that AI would significantly change the way their firms work.

This is not necessarily a new concept. A survey by Accenture in 2020 found that 84 percent of the executives surveyed said they believed AI would “fundamentally transform the wealth management industry over the next five years” despite 85 percent also stating that AI’s impact was “more hype than reality for businesses today.”

AI has long been used in wealth management, from prospecting tools that use machine learning and publicly available market data to help advisors hyperpersonalize their outreach to financial planning software that helps advisors analyze estate and tax data. However, with the advent of ChatGPT, more and more companies have begun incorporating generative AI into their road maps, even if the adoption of the technology is still in its infancy.

However, AI is not the only technology that will change how wealth management firms operate.

According to the survey, 52 percent of executives said that they believed that “most products will become commoditized, forcing providers to offer value-added services to defend fees.” Additionally, 39 percent of executives believe the “lines between wealth management, banking, and insurance will blur as investors demand more holistic products and services.”

This can already be seen today.

Betterment, one of the top robo-advisors in the U.S. known for its large retail market base, has recently started to make headway as a competing custodian for financial advisors. Additionally, banks and insurers have long been one of the top acquirers of RIAs. In 2023, strategic acquirers such as banks, asset managers, and insurance companies represented about 12 percent of all RIAs acquirers, according to Echelon Partners, an investment bank and consulting firm focused on wealth and investment managers. In 2022 and 2021, that number was about 21 percent.

Additionally, many service providers have already started making technology a core competence. According to the report, almost 9 out of 10 investment providers are at least midway in implementing a modernized, cloud-based platform.

Technology is also changing the advisory role. According to the report, 67 percent of advisors said they “will move to a hybrid, tech-driven approach, with more limited personal advice, in three years.” And they will face a generation of investors who believe they can compete on their own due to advances in technology. The survey found that 60 percent of Gens Y and Z “do not expect to use advisors due to advances in technology by 2030.”

In order to compete in the coming tech revolution, firms will need to drive performance through AI and digital innovation and invest in digital solutions that will in turn potentially drive down fees, according to the report. Companies that invested in their digital technology reported lower costs (45 percent of firms surveyed), higher shareholder value (41 percent), and increased revenue (40 percent).

“This comprehensive study demonstrates how the landscape of advisory firms will continue to constantly transform in the US and across financial markets globally,” Tom Chard, CEO of FNZ North America, said in an emailed statement to RIA Intel. “There are already near-term ways we’re harnessing technology to close portions of the advice gap and enable advisory firms to offer market-leading personalized wealth solutions that extend to more clients at an industrial scale. These technologies will play a pivotal role in enabling advisors to scale their services without sacrificing the personal touch and behavioral guidance crucial to financial advising.”

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