The Wealth and Asset Management industry is about to undergo unprecedented disruption according to new industry research by Roubini ThoughtLab in partnership with Cisco and 16 prestigious industry firms. Get your seat belts on!
The three main takeaways from this research are:
- this is the first research piece that combines economists, technologists, providers, and investors — 500 wealth services providers and 2000 investors across 10 leading markets
- the wealth and asset management industry will expand by $50 Trillion USD by 2021 yet 48% of investors declared they will switch providers if their new needs are not met
- Digital technology will play a big factor in market leadership and the winners will likely be full-service institutions and mutual funds companies who invest in Fintech capabilities.
Unprecedented market dynamics are in play as we continue to see margin pressure in the wealth industry, increasing operational risks due to cyber-security vulnerabilities, and increasing regulatory costs. In order to meet Return-On-Equity targets firms need to consider headcount, the cost of buildings, and innovation programs for both financial advisors and external client experience.
The Internet will grow from 3.1 billion unique users today to 4.1 billion over the next 3 years creating market reach at scale the world has not yet experienced. Price points for automated financial advice are approaching zero so wealth firms need to learn how to compete with free for asset allocation and information services while using digital technology to enhance their people side of the advisory business.
There remain gaps in digital readiness. For example the Wealth 2021 study revealed that 63% of investors believe their providers are prepared to ensure cyber security but only 48% of providers said they were prepared. Providers are investing and expect to grow use of telepresence and collaboration by 68%, web analytics and sentiment analysis by 77%, and use of artificial intelligence by 128%
We see the potential for hundreds of millions of new entrants into the financial system by 2021 given the new reach the 4.1 billion user Internet provides. This will take place in the context of the Internet of Things, wealth advice services being delivered via software platforms at scale, and professional financial advice price points approaching zero. Everyone with a bank account is going to become an investor.
These trends will put extreme price pressure on wealth advisors the world over, fuel a new wave of financial advice capability and self-service automation, and require wealth firms to rethink their business models in order to earn a market leadership position in the year 2021.
What are wealth and asset management firms to do? Wealth and Asset Management firms can:
- Create a gap analysis and future state digital vision and plan (tip: the new vision for financial services providers is to be present in the financial lives of their customers any time, any place, on any device, across any channel)
- Create a digital transformation roadmap with clear business outcomes and success measurements
- Consider the digital transformation pillars of people, process, policy, governance, and technology
- Put the customer at the center of the strategy when re-engineering the front, middle, and back offices for the wealth and asset management provider of the future