How Financial Planning is Evolving, By: JT Martin

The financial advisory and wealth management industry is a huge market globally, with an estimated $89 trillion in assets under management in 2019. With so much of the world’s wealth entrusted to them, the changes that this industry will influence millions of people around the world and how their money is being managed.

One of the most undeniable and apparent trends in this industry is the movement toward a more technological-based service for their clients. Similar to many retail investment platforms and many more industries, consumers want a more personalized, easy-access platform on their smartphones or laptops in which they can access information about the status of their portfolio or account as well as find simple advisory information. This movement towards a more digital experience is seen as a crucial change for the industry as millennials begin to become the primary consumers to enter the market. The hybrid investment experience can see a similar appeal to retail investors that have shown recent prominence on platforms like Robinhood.

Another aspect of wealth management that is evolving is the needs and focus of their clients. Clients have become less concerned with retirement planning and low-risk portfolios to more goal-based planning that ranges across various platforms. People are not as concerned about their own retirement planning and are more focused on growing their wealth for the near future and diversifying their sources of income as well as estate planning.

The recent years have seen growing popularity in personal wealth management, especially in the younger age demographics. There were many contributing factors to this, such as the COVID-19 pandemic, the “meme” stock frenzy, as well as the growth in popularity of cryptocurrencies. The amount of information and personalization consumers are expecting from their advisors is growing exponentially. With information on investing and trading platforms more accessible and simple than ever, the amount of people that are investing personally and that feel that managing their money is an essential element to their lives is at an all-time high. This growth in financial literacy, particularly at a younger age, and consumers want to feel that their money is being handled and invested in a way that is personal and catered to them and their own beliefs are one that signifies that the wealth management industry will grow as a whole.

These trends will not only influence how wealth management will be done but also the structure of the firms themselves. Although there is no real trend or statistic to point to for this point, I feel that over the next five years, two main strategies will form in wealth management firms. Especially as the technological advances make it easier for advisors to accommodate the needs of more clients at one time, I think there will be a consolidation of advisors in certain firms while others will focus on a hyper-personalized approach in which advisors are only handling responsibilities for very few clients. While the total number of advisors may not be drastically influenced as a whole, this shift in their customer service strategy could change how wealth management firms handle their client relationships for the next generations of consumers.

Work Cited

Baghai, Pooneh, et al. “On the Cusp of Change: North American Wealth Management in 2030.” McKinsey & Company, McKinsey & Company, 6 Feb. 2020, www.mckinsey.com/industries/financial-services/our-insights/on-the-cusp-of-change-north-american-wealth-management-in-2030.

Ross, Sean. “How Big Is the Wealth Management and Financial Adviser Industry?” Investopedia, Investopedia, 5 Aug. 2021, www.investopedia.com/articles/professionals/111115/how-big-wealth-management-and-financial-advisor-industry.asp.

Wohlner, Roger. “Business Trends for Financial Advisors to Watch in 2021.” TheStreet, TheStreet, 4 Jan. 2021, www.thestreet.com/financial-advisor-center/financial-advisers-business-trends-to-watch-in-2021.