Wealth Management’s Future: Embracing Innovation for the Next Investment Era

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New research outlines the need for wealth management firms to adapt to technological advances and changing investor profiles for future success.

In the face of a rapidly changing financial landscape, wealth management firms are poised to undergo significant transformation. A recent study led by a research coalition consisting of ThoughtLab, Deloitte and FNZ, with contributions from Amazon Web Services (AWS) and Genesys, reveals that by 2028 the investment industry will witness a drastic change with digital innovation and artificial intelligence (AI) are becoming critical components of prosperity.

The comprehensive analysis, which includes insights from 250 wealth management firms and feedback from 2,000 global investors, shows that 55% of executives expect born-digital firms to significantly transform the wealth industry. Additionally, 52% of wealth management firms at the forefront of digital transformation foresee a dramatic reconfiguration of the industry.

A remarkable 69% of executives are convinced that artificial intelligence will significantly change their company’s operations. At the same time, 47% predict that blockchain and related technologies will minimize the need for intermediaries such as custodians and clearing houses, highlighting the growing importance of decentralization in financial services.

Executives also predict a trend toward commercialization of most products, forcing vendors to offer value-added services to justify fees. Additionally, 39% expect the lines between wealth management, banking and insurance to blur as investors demand more integrated financial solutions.

The study highlights the urgent need for digital and process transformation as Generation X rises in influence and Generations Y and Z, along with emerging market wealth, begin to shape investment landscapes. The overwhelming majority of investors, especially younger generations, expect digital experiences from investment providers that match those of leading digital companies.

In response to this evolving dynamic, investment providers are elevating technology to a core competency, with the vast majority advancing to or already deploying modernized, cloud-based platforms. These platforms enable wealth management firms to digitize operations, reduce costs, create new business models and tap into new revenue streams.

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The Building a Future-Ready Investment Firm study, conducted October-November 2023, provides both quantitative data and qualitative insights, including perspectives from an advisory panel of industry experts and in-depth interviews with senior practitioners from 11 firms for wealth management.

Louis Celli, CEO of ThoughtLab and director of research, emphasizes the importance of understanding the expectations and behavior of prospective investors to ensure customer satisfaction. He emphasizes that wealth management firms need to rethink their offerings, workflows, business models and digital strategies to become future-ready.

Five key actions emerged from the survey for wealth management firms aiming to prepare for the next investment era:

Digitize customer advice and experience.

Leverage customer diversity for business growth.

Use AI and digital innovation to improve productivity.

Innovative proposals to meet future investment requirements.

Adapt business models and market positioning to a new competitive environment.

To delve deeper into the study’s findings and explore evolving strategies for investment firms, the full report is available for download.

The insights from this study are critical for wealth management firms as they navigate the transition to a more digitally-driven, investor-centric future. With the right approach, these firms can not only survive, but thrive in the next era of investing.

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