How wealth managers can orchestrate better outcomes

The wealth management industry has changed more in the past four or five years than it has since the beginning of this century. This change has largely been driven by technological innovation from the WealthTech and FinTech space — in particular, the disruption driven by robo advisors. Initially, these changes disrupted the industry by bringing to the masses greater access via a tech-driven approach to investing. But more recently, and particularly resulting from the global pandemic, it has also disrupted traditional wealth managers and private banks by forcing them to accelerate their technology adoption and digitalization capabilities for both their people and their clients. This ultimately developed into the hybrid model of wealth advice, which has become prevalent in both traditional and emerging wealth segments of the market.

But this advice is still, for the most part, centered on products, just as wealth advice historically has been. Today, and looking forward, there is an opportunity to change that and offer more clients personalized advice that focuses on outcomes. This is a powerful opportunity for further change that the EY Global Center for Wealth Management identifies in its recent 2024 EY Global Wealth Management Industry report as “client-centric wealth advice.”

It’s powerful because it gives the industry the opportunity to address three of the biggest challenges that it faces.

1) Broadening access to financial advice

Traditionally, wealth advice has been restricted to a fairly limited section of the population, but the ability to both scale and personalize advice now makes it more practical to extend the client base for that advice beyond the high net worth (HNW) and Ultra-HNW segments to the middle — and even the lower — end of the traditional wealth spectrum. By growing the available market for advice, this expansion of access clearly has benefits for the wealth management industry, as well as for those receiving the advice.

2) Enabling clients to access nontraditional investments

Private markets have been growing for a number of years now, more than doubling from US$9.7t in assets under management (AUM) in 2012 to an estimated US$24.4t AUM by the end of 2023. This growth has been driven by factors such as investors’ search for noncorrelated, higher yields; more businesses remaining private with financing needs; and the increasing numbers of HNWIs with more investable wealth. Client-centric wealth advice offers clients the opportunity to extend private-market access to a broader range of people. It provides the ability to participate in growth markets and narrows gap to access that have been widened over the past few years. This access does come with a responsibility to enhance financial education as part of the expansion.

3) Helping individuals to address their long-term financial needs

As more and more of the population is living longer, an ever-greater proportion of wealth advice concerns retirement planning, not only accumulation but decumulation — having enough for a longer period of time for a meaningful retirement. Further, people are increasingly being expected to take more individual responsibility for their retirement. This is where increasing access to financial wellness planning and literacy broadly, and private markets specifically, can really make a difference. Client-centric wealth advice can help to align the management of risk with long-term outcomes, whether that’s for retirement or otherwise.

By shifting the focus to client-centric wealth advice, the industry has an opportunity to act as an orchestrator, tackling all three of these issues as part of a holistic package.

No one is saying that this will be easy. The wealth management industry has historically been slow to change, but, in an age of fast-moving and disruptive technological developments, it has shown that it can adapt more quickly. The key is, rather than asking, “Why can’t we?” — ask “How can we?”

By embracing the change and acting as an orchestrator, the wealth management industry can use client-centric wealth advice to address some of the biggest challenges that exist today.

I’d like to know your thoughts on this topic, so, whether you agree or disagree, please share your comments below.

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