February 22, 2024

In the good old days, wealth management was a stuffy scene inhabited by older generations. It was usually managed by lifelong financial advisors who handled the portfolios and kept the investments ticking over from a discreet distance. 
These days, however, the situation is very different. Those interested in managing their wealth effectively are, perhaps surprisingly, getting younger and younger. Furthermore, they are increasingly demanding, wanting to explore the latest financial innovations open to them and obtain everything at the touch of a button, no matter when or where. Nothing is as it was, and it will never be so again. 
Cory McCruden is an advisor and thought leader of wealth managers, possessing in-depth expertise for digital transformation, customer experience, and fintech. Through her roles at Fortune 500 wealth manager Waddell and Reed, as Head of Client and Advisor Experience and Innovation, and RBC, as Lead for Client Experience and Digital Transformation, McCruden has helped thousands of financial advisors grow their businesses.
Speaking about disruption within the wealth manager space, she says: “First is demographics. US$68trn of wealth will transition to Generations X,Y, and Z over the next 20 years. Wealth managers today need to ensure they are actively engaging these investors and diversifying their client base. Today, less than 20% of advisors are targeting these younger investors.
“Second is digitisation along with consumer and advisor expectations for tools that provide them with more convenient, personalised experiences. COVID rapidly accelerated the extent to which consumers across all segments are comfortable engaging through digital channels.”
McCruden predicts omnichannel is now a requirement and no longer a ‘nice to have’. The bar for more personalisation and customised solutions for that customer will also continue to be raised. “As our ability to collect information and, most importantly, make sense of the data we garner through engagement improves, so will the customer and advisor experience.”
Many experts point out that embedded financial solutions that facilitate integrated experiences are a huge contributing factor to disruption in the space. McCruden agrees: “For far too long, the financial services industry has expected the customer to come to them when there is a need. It’s an unrealistic expectation of customers, that they should know which financial product they need and when they need it. That’s why payment and credit products embedded in the checkout experience have been so successful.”
Streamlined, frictionless customer experiences are key, she says, because they are there to facilitate what the consumer is trying to do without that consumer having to think about it.  
“I think what we’ll continue to see is powerful consumer brands in retail and other verticals expanding into financial services, seamlessly integrating fintech solutions in their offerings. Walmart’s expansion into fintech is a great example of how they are creating a marketplace of financial solutions, designed to specifically meet the highest value needs of their consumer and employee base.”
As innovative technologies continue to flood the marketplace, fintechs are under pressure to present customers with the latest, greatest and fastest offerings at a lower cost if they are to compete. 
Alistair Shipp, Executive Director of Capco, explains: “A changing of the guard is underway within wealth management, with a younger cohort of millennial and Gen-Z investors forcing firms to rethink their product offerings and client services’ model. Driven by evolving client demographics, demand for customised investment solutions, enhanced technology, and industry consolidation, firms that serve the younger generation will be well positioned to capture asset growth.
“A key differentiator will be how firms truly educate and engage these new investors and go beyond any minimum requirements that may be set out as part of the FCA’s Consumer Duty regulations.
“Firms are competing on the next wave of growth within products, including: digital assets, ESG, and custom indexing; client segments involving emerging high-net-worth investors and women; and service models comprising holistic advice, digital engagement, and fee modernisation. Against the backdrop of a changing regulatory environment and looming disruption from ‘big tech’, incumbents must balance retaining existing assets with growth opportunities, as firms build and deepen relationships with next-gen investors.”
Shipp says: “With growth expected to rise significantly in the next 3-5 years, there’s a revenue opportunity linked to these actively managed products. Advanced technology, low trading fees, and the proliferation of fractional shares has democratised access to investors across the value chain. Following the wave of acquisitions in 2020 and 2021, firms are scrambling to integrate these strategies as part of their portfolio.”
As well as the new raft of demographics to cater to, the financial landscape has changed significantly over the past decade. With the growth of cryptocurrency ‒ which enjoyed a surging transaction rate of 912% in 2021 compared to rates in 2020 ‒ wealth managers need to make sure they can provide the most current information and products to their customers. 
McCruden points out that, between 2018 and 2020, the number of cryptocurrency users globally increased almost 200%. “There’s still a lot of friction when it comes to actually using cryptocurrencies for day-to-day transactions, and it’s largely used by investors today as an investment vehicle or inflation hedge. Other use cases leveraging the blockchain that will reshape financial services include smart contracts and identity verification.”
Shipp says we have only witnessed the tip of the iceberg when it comes to crypto in the wealth management space. “While the slow pace of crypto adoption by wealth managers has empowered new entrants to engage wealthy investors, the capitalisation of the crypto market now exceeds $2bn and presents a sizeable revenue opportunity for asset and wealth managers. 
“As firms continue grappling with regulation uncertainty and volatility while advisers remain sceptical of the asset class, clients have invested their assets outside of their primary money manager relationships.”
He continues: “Competitors should re-evaluate the products currently offered and incorporate digital assets as part of their portfolio. We expect to see more strategic partnerships and potential acquisitions between vendors within the digital asset ecosystem and institutional investors, particularly in tokenisation and distributed ledger technology applied to a broader range of asset classes outside digital currencies.”
As technology marches forward, so too will the continued disruptions, which, at the moment, are mainly seeking to provide customers with enhanced, cost-effective services. Personalisation, predicts McCruden, will be at the heart of the changes. 
She says: “We will continue to get better at serving our customers with a level of personalisation we have never seen before. Most wealth managers use some form of customer segmentation, for example, household wealth, or, risk tolerance, or age… Eventually, through data and AI, segmentation will better reflect consumer needs at a more granular level, so we will be able to service clients with the right products and services at the right time on the customer journey.”
“If you think about some of the most successful fintech models, they’re those that are embedded in other customer experiences. Financial services, in and of itself, is not an experience. I think of financial services as electricity, something in the background that you need to power and enable whatever it is you want to do,” McCruden concludes. 
Shipp outlines three main trends currently reshaping the space. They are:
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