Wealth Management Trends 2021: COVID-19, Technology, Outsourcing

December 28, 2020 - Stephen Van de Wetering

Stacked Coins

Recent wealth management trends show the old way of doing things will no longer apply. COVID-19 changed the way wealth managers do business.

While the pandemic brings challenges, there are opportunities for those who adjust and adapt.

8 Wealth Management Trends for 2021

Recovering Wealth

At the beginning of the pandemic, the stock market was in freefall. Despite the ongoing battle with COVID-19, the markets recovered quickly, and with that, so did the fortunes of investors and the world’s wealthiest.

This is not to downplay or ignore the challenges others face.

Unemployment, reduced income, and food insecurity are a reality for too many. Improving the situation will be a long-term effort.

Nonetheless, an economic recovery is underway. For those who see their wealth levels rise, they serve as potential clients for wealth managers.

For those looking globally, Asia is one of the world’s relative bright spots. As an example, HSBC expects to achieve double-digit asset growth in its wealth business in the Asia-Pacific region by 2023, highlighting the region’s growing rich population.

With a growing number of wealthy individuals, there is a demand for talent to manage that wealth. Amy Lo, UBS co-head of wealth management in Asia, says there is a talent shortage and a talent war.

Therein lies opportunity in Asia for firms to help serve a growing market where the demand for talent can’t keep the pace.

Firms that understand the clients’ needs and offer the right products and services, while successfully  navigating the regulatory and cultural environments, will win big.

More Advisory Firms, Fewer Winners

There are now 12,993 registered investment advisors in the United States, an increase of over 3% from two years ago.

Hundred dollar puzzle

In spite of the growth in wealth and the demand for talent, there is another challenge in that a disproportionate amount of assets could be concentrated in the hands of fewer advisors.

With growing competition and an increasingly digital atmosphere, wealth managers must adapt technologically to stay ahead.

Good marketing, sales, and networking are also important. Check out some of our recent content around these topics:

Fee Compression Continues

The downward pressure on fees continues, hitting new record lows.

Larger competitors like BlackRock and Vanguard are cutting their fees, putting pressure on smaller asset and wealth managers alike.

While bigger firms can withstand lower fees due to their sheer size and growth of clientele, smaller organizations do not have that luxury.

Responding to increased competition and fee compression will be an important area of focus on wealth management trends, mentioned in sections below.

Remote Work Continues

Vaccines are on the way, but it will take months to distribute them and see cases decline significantly.

RIA Hiring_Desk and Laptop

Until that happens, most wealth managers will continue working remotely from home through 2021.

Since March 2020, the transition from office to home has been a success, a PwC report illustrated.  More than 70% of financial services employers surveyed found work-from-home to be successful or very successful.

Even when the virus subsides, remote work could be a permanent fixture. If things are going well enough as is, do you need all that office space? One of our recent posts discuss the topic of office space for RIAs in more detail.

Focus on ESG Investing

From COVID-19 to the George Floyd protests, from extreme weather to high-stakes elections in the US, 2020 is a year for the history books. 

Public health, societal issues, and environment all took center stage at various points during the year. Individuals increasingly recognize the role they can play to address these matters.

Clients want investments that reflect their values, and they want to invest in companies that contribute to positive outcomes. 

ESG isn’t just a “fad.” ESG is a real wealth management trend with staying power, and it is big business.

Sustainable investing now accounts for 33% of total U.S. assets under management. What’s more, ESG funds outperformed during the pandemic.

ESG investing has been gaining momentum the past few years, regardless of the political climate. Peter Krull, Founder, CEO and Director of investments at Earth Equity Advisors, shared his take:

“After the 2016 election, people said that if the government isn’t going to work on these issues, we’re going to have to do it for ourselves… If the last four years of growth were with headwinds, I’m really excited about seeing a tailwind.”

With increased political support from a Biden administration, ESG investors can look forward to good returns.

Generational Wealth Transfers

For the last few years, there has been talk about the “Great Wealth Transfer.”

Year by year, it comes ever closer.

The Baby Boomer generation, roughly defined as those born between the mid-1940s and mid-1960s, will soon retire in ever larger numbers. 

As that happens, they will pass on wealth to children and grandchildren, collectively amounting to $30 trillion.

Wealth advisors need to think about their older clientele: when are they passing wealth and assets to beneficiaries? Who will the beneficiaries decide to manage their newly inherited money?

Wealth management firms should think about how to ways to keep the business of the older clients’ beneficiary family members.

To learn more, check out one of our posts on how wealth managers can attract millennial clients.

Wealth Transfer under a Biden Administration

In one of our earlier posts, we analyzed what a Trump or Biden presidential election victory means for money managers.

Washington Capitol

While a Trump residency led to tax cuts, a Biden administration is looking at raising taxes on the highest income brackets. In addition, the Democrats could close loopholes that once made estate and gift taxes possible to avoid.

Still, a near-split Congress and Senate could create gridlock, allowing for more time to transfer wealth before any Biden-led policies are enacted.

That hasn’t stopped wealthy clients from transfers, however. Near the end of 2020, advisors have been “busier than ever” helping clients transfer wealth tax-free, and that should be the case while time permits in 2021.

Older Advisors Planning to Retire

Just as we mentioned a talent shortage in Asia, the US can expect shortages as well.

About 40% of financial advisors plan to retire within 10 years, according to CNBC. In fact, there are more certified planners over the age of 70 than there are under 30.

For business owners close to retirement, they should think about succession planning for their business, as well as attracting new talent. 

This includes outreach to college students, in particular women and minorities who are currently underrepresented in the investment industry. Expanding and cultivating the talent base is a win for all wealth management firms. 

Personalized Wealth Management Services; Leveraging Technology

The great wealth management companies know how to tailor the client experience, making optimal use of human capital and technology.

Furthermore, the call for digital adoption among wealth managing firms is nothing new. It’s a message loudly proclaimed even before the pandemic.

Candice Carlton, senior vice president of adviser education at FiComm Partners, stated it best as quoted in this InvestmentNews article

“To stay relevant, it is critical that the adviser of today stay connected in a high-touch, digitally enhanced way to drive loyalty, trust and wallet share. Clients now expect their advisers to add value beyond the traditional financial plan and twice a year in-person meeting…  advisers need help in learning how to adopt and use modern communication mediums to supercharge their prospect and client experience.”

AI & Robotic Process Automation

As wealth management competition intensifies, moving fast in an efficient manner is more than ever.

New technology is making it possible to do more in less time and with fewer resources.

Artificial intelligence (AI) is one of the tools to help. Machine learning can help wealth managers recognize patterns, anticipate future events, create rules, make good decisions, and communicate with others.

AI is big business. The global AI software market is projected to grow rapidly in the coming years, reaching USD $126 billion by 2025.

And by 2024, 75% of organizations will shift from piloting to operationalizing artificial intelligence, according to Gartner.

Despite the known benefits, just one-third of wealth managers in North America are currently scaling AI across their businesses.

“The findings suggest that although wealth managers are eager to embrace AI, they largely haven’t been able to move beyond experimentation toward widespread organizational application at scale. They also appear to underestimate the long-term value of AI, coupled with data and analytics, to reinvent the client experience and empower advisors to have more personalized client conversations and sell the right products at the right moments in their clients’ lives.”

Scott Reddel, Managing Director of Capital Markets & Wealth Management at Accenture

To learn more about AI use cases and benefits for investment managers, check out this Deloitte report.

While AI focuses on the independent learning of machines, Robotic Process Automation (RPA) focuses on performing routine and predictable tasks.

Repeatable steps like downloading statements, storing files, and emailing reports can be done through RPA. In fact, has Empaxis has developed tools to help in these areas, helping investment firms of all kinds.

Broadridge survey revealed that 57% of financial firms have long-term plans to increase automation through RPA and AI.

Data & Analytics

Data Integration

We live in a data-driven world.

In an increasingly competitive space, wealth managers need accurate, up-to-date information to allow for faster decision-making

Having the means to aggregate data and see it in a nice, clean and customizable format is indeed helpful.

And it’s not just for the wealth managers; it’s for their clients, too. Clients across all age ranges are coming to expect modern fintech from their advisors.

Even older clients that generally shunned new technology are now opening to it, given the importance of protecting their health during the pandemic.

Clients should have easy and instant access to their portfolio details, via cloud-based technology.

It’s to a point where these features are no longer just nice additions; they are necessities.

Good data is a significant part of a firm’s credibility. Having the right data management and portfolio management platforms like TAMP1 can help.


Being an expert at everything is not easy, nor is it necessary.

Wealth management executives and their staff should focus on what they do best: investing and client servicing.

Admin and operational work are important, but they’re not the main reasons for going into business. 

For anything that is non-core and a cost of doing business, it can be outsourced.

Fidelity survey on outsourcing for wealth managers shows just the value that can be had from leveraging third parties. In short, those who outsourced were more likely to report a growth in clients and larger AUM.

The Next Step for Wealth Managers

The recent wealth management trends show opportunities and challenges facing the industry, and firms should look at the trends to develop a strategy around an investing, operations, technology, client servicing, etc.

The presence of COVID-19 will continue having a significant impact on the way the wealth managers run their businesses, and their short- to medium-term strategies should take into account the memories and lessons from the pandemic.

Despite the challenges, there is nonetheless opportunity out there for wealth managers; they just have to prepare and position themselves accordingly.

Empaxis is a leading provider of operational and technology solutions for wealth managers, helping them increase efficiency and scale while cutting costs. Looking to improve your organization? We can help.

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