Facilitator: Rod Bryson, TATA Consultancy Services Expert: James Holmes, SECCL
Headlines:
- The wealth management industry faces a $7 trillion wealth transfer between generations, with a significant number of heirs expected to change financial advisers after inheriting wealth
- Younger generations are accustomed to modern financial apps like WANZO, Revolut, and Tide, setting new expectations for wealth management services
- The pressure on costs is rising, with an expected reduction in fees from 185 basis points to 85 basis points by 2030
- Personalisation and goal-based financial planning are becoming increasingly important, with a focus on client progress toward financial goals
- Legacy systems are hindering integration and modernisation efforts in wealth management, requiring more open ecosystems and consolidation
- The impact of consumer duty regulations is being debated, with a focus on how it drives customer outcomes versus firm risk mitigation
- AI is expected to play a larger role in wealth management, enabling real-time feedback and personalised recommendations
Discussion points:
Introduction and Overview of Wealth Management Challenges
The expected $7 trillion wealth transfer and the challenge of retaining clients as wealth shifts between generations was highlighted. A key concern is that 90% of heirs are expected to change financial advisers after inheriting wealth.
Technological Adaptation and Changing Client Expectations
The growing need for wealth management firms to adapt to technological advancements was emphasised. Younger generations, in particular, are used to seamless financial experiences with apps like WANZO, Revolut, and Tide. These younger clients expect similar levels of technology from wealth management services, and the industry must modernise to meet these expectations.
Cost Pressures and Fee Structures
The rising cost pressures in wealth management and predicted decrease in overall fees from 185 basis points to 85 basis points by 2030 due to increased competition and the need to profitably serve clients with lower asset levels. The trend of absorbing platform fees into advice fees was highlighted as a potential solution to reduce costs for clients.
Personalisation and Goal-Based Planning
A key trend in wealth management is the shift toward more personalised and goal-based financial planning. Clients, especially younger ones, are less interested in asset values alone and more focused on tracking their progress toward specific financial goals. This shift is driving wealth management firms to adopt customer modelling and more individualised financial strategies.
Integration Challenges and Future Technology Landscape
The conversation turned to the challenges posed by legacy systems in wealth management. It was noted that integrating various software platforms remains a significant hurdle, and the industry may need to move toward more open ecosystems or consolidate systems to improve efficiency. The future landscape may include more innovative tech solutions that integrate seamlessly across platforms.
Regulatory Impact and Consumer Duty
The impact of regulatory changes, particularly consumer duty regulations, was discussed. While many firms are working on compliance, there is a debate on whether these regulations will drive meaningful improvements in customer outcomes or are mainly a risk mitigation strategy for firms. The discussion revealed that the full impact on consumers is still unclear.
Personalisation and Future Trends
The final part of the discussion focused on future trends, particularly the role of AI in wealth management. The potential for AI to provide real-time feedback and personalised recommendations during client meetings, enabling wealth managers to offer more tailored services was highlighted, as well as how AI could also help firms engage clients more effectively through automated yet personalised interactions.
Key takeaways:
- The industry faces a significant wealth transfer, with younger generations setting new expectations for technology and financial services
- Reductions in fees are expected, driven by competition and the demand for more cost-effective solutions
- Personalisation and goal-based planning are becoming central to wealth management, as clients seek progress towards their financial goals rather than just asset values
- The integration of legacy systems continues to be a major challenge, and future solutions may require more open platforms and ecosystems
- Consumer duty regulations are having an impact, but it's unclear whether they will lead to better client outcomes or simply serve as a risk mitigation tool for firms
- AI has the potential to transform wealth management, offering real-time feedback and personalised recommendations to improve client engagement
