Practical analysis for investment professionals
15 December 2014

Best of 2014: Wealth Management Trends and Challenges

Posted In: Best Of

As we round out 2014, we’ve been thinking about some of the key trends/issues that shaped the wealth management industry in the United States.

Undoubtedly one of the biggest stories this year was the rise of the robo-advisers and their growth in assets under management (AUM). Retirement security was another big story.

But looking in the rearview mirror is only so useful. What’s just as important to consider is which trends will continue to influence the advisory business in 2015 and beyond.

With that in mind, here’s a snapshot of two broad themes — demographics and technology — we think will continue to play out in the near future, along with some of the relevant articles that were published this year in these areas.

Trends in Demographics

1. Women Hold the Purse Strings

“The facts are amazing and people don’t know them. In the next five years the global income of women will grow from $13tn to $18tn — that is more than the GDP growth of China and India combined during the same period. By 2028, women will control 75 per cent of discretionary spending around the world.” — Virginie Maisonneuve, head of equities at PIMCO, as quoted in “What Women Want Is Good Financial Advice.

Here are a few more facts to consider. Women:

In Fidelity Investment’s 2013 Shareholder Update, Abigail Johnson, president of Fidelity Investments parent company FMR LLC, noted, “Across the board, women are unhappy with our industry. Our research shows many lack confidence in their ability to make financial decisions — particularly younger women. Yet, at the same time, women are becoming increasingly powerful in our economy — controlling more wealth, often out-earning their spouses, and making more retirement decisions.”

Sallie Krawcheck, chair of Ellevate and past president of Global Wealth and Investment Management for Bank of America, says the industry needs to think of women clients as “an emerging market.”

The challenge for all of us is to really look at what these emerging clients are looking for and deliver them . . . What we’re talking about is a broader theme of ’emerging markets.’ I don’t mean BRICs, what I mean are emerging consumers of financial services, emerging consumers of wealth management services,” she said.

2. Gen Y: Be There or Be Square

“We do things on our schedule, from our phones with the push of a button, and we absolutely demand affordability.” — Alexa von Tobel, Gen Y founder of LearnVest, as quoted in “The Recession Generation: How Millennials Are Changing Money Management Forever.”

There are a couple of things you should know about millennials:

  • There are about 80 million of them currently living in the United States. By 2020, they will make up half of the US workforce, according to the 2014 Millennial Impact Report;
  • They don’t trust financial institutions.

A recent InvestmentNews research survey set out to learn the expectations of younger investors — the client of the future — as well as their adviser counterparts. The survey found that millennials:

  • Are after an array of services, such as cash-flow planning, financial plan development, and advice on retirement.
  • Expect those services to be increasingly delivered online.
  • Want more frequent contact with their advisers than their elders but heavily favor social media, text messaging, email, and video conferencing over phone and face-to-face meetings.

3. The Age of Aging Advisors

“All of us in this industry are facing the same dilemma, which is, where is that next generation going to come from?” — Erica McGinnis, president and CEO of the AIG Advisor Group, as quoted in “A Hunt to Find the Next Generation of Financial Advisers.

Which half are you in?

4. Kaboom! Boomers Head Into Retirement

“People are living longer and looking with a more critical eye at their retirement and whether they’ll have enough funds.” — Leo Kelly III, CEO of Kelly Wealth Management, as quoted in “Making Sure Retirement Savings Don’t Run Out.”

Trends in Technology

1. Social Media Inflection Point

“The digital experience does not start and finish with a fancy interactive website. [Clients] expect their wealth-management experience to be as good as, if not better, than the best that retail — such as Apple — has to offer.” — Sebastian Dovey, Scorpio Partnership, as quoted in “Wealth Management’s Biggest Losers.

The stakes are high: The World Wealth Report 2014 from Capgemini and RBC Wealth Management found that high-net-worth investors “are likely to leave firms that do not allow them to transact digitally,” while nearly two-thirds of clients with at least $1 million or more in investable assets expect to manage most or all of their wealth relationship digitally in five years and would consider leaving their current firm if an “rated channel experience” is not provided.

2. Robo-Advisers Are Here

“It is naive to think that the world of financial advisers would be untouched by accelerating technology trends. The only question for advisers is how they can get on the right side of these trends as opposed to be disrupted by them.” — Tadas Viskanta, founder and editor of the investment blog Abnormal Returns, as quoted inFinancial Advisers Need to Get ‘On the Right Side’ of the Robo-Adviser Trend.

If you are an adviser, ask yourself: “How do I justify my fee to clients?”

3. Cyber (in)Security

“The frequency and sophistication of these attacks appears to be increasing. In light of this ongoing threat, FINRA continues to be concerned about the rity of firms’ infrastructure and the safety and security of sensitive customer data.”Financial Industry Regulatory Authority (FINRA) letter, 2 January 2014.

  • In the United States, the Securities and Exchange Commission (SEC) and the FINRA have identified cybersecurity as a heightened risk.
  • According to a recent survey by the Investment Adviser Association, ACA Compliance Group, and Old Mutual Asset Management, three-quarters of respondents considered cybersecurity/data security/privacy to be an important compliance topic.
  • In December 2013, the Financial Times reported that “Cyber criminals are increasingly hacking into the systems of wealth managers in order to steal money from better-protected clearing banks, according to Kroll, the investigations agency.”
  • The Wall Street Journal noted recently that more advisors are insuring against cyber threats.

We plan to explore some of these themes — including cyber risk, millennials and money, and planning for retirement — in greater depth during our upcoming Wealth Management 2015 conference in New Orleans, March 4–5. We hope you can join us.

If you liked this post, don’t forget to subscribe to the Enterprising Investor.


All posts are the opinion of the author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer.

About the Author(s)
Lauren Foster

Lauren Foster is the former managing editor of Enterprising Investor and co-lead of CFA Institute’s Women in Investment Management initiative. Previously, she worked as a freelance writer for Barron’s and the Financial Times. Prior to her freelance work, Foster spent nearly a decade on staff at the FT as a reporter and editor based in the New York bureau. Foster holds a BA in political science from the University of Cape Town, and an MS in journalism from Columbia University.

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