Has Covid forever changed the way wealth managers work with clients?

By Puja Sharma

The wealth management market is expected to grow from $475.8b in 2020 to $730.7b in 2025 at a rate of 9.0%. The market is then expected to grow at a CAGR of 8.8% from 2025 and reach $1,116.1b in 2030.

A study reveals ways Covid forever changed how financial advisors work with clients. Nine out of ten (92%) wealth managers agree that Big Tech institutions, such as Amazon, Apple, Facebook, and Google, will enter the market, and a half (50%) believe these companies will create significant disruption in the wealth management industry, according to a new joint study from Capco and the Stevens School of Business.

Entitled “How Wealth Management Firms Can Win in Turbulent Times,” the study conducted an online survey of 100 wealth management professionals to explore the current state of the wealth management market, the changing competitive landscape, and how the Covid pandemic is affecting priorities and business decisions.

The study’s findings reveal how wealth management firms can meet increasing customer expectations and address new competitive threats:

Focus on providing a seamless digital customer experience. As clients come to expect a comprehensive approach to their financial lives, a seamless digital experience will provide an advantage in an increasingly competitive market. About 92% of respondents agreed that Big Tech will enter the market, while 50% believe these companies will create significant disruption in the wealth management industry.

Shift to remote communications

Following the Covid lockdowns, financial advisors have met with clients via video rather than face-to-face in their office, a trend the industry had previously resisted. Around 86% of respondents said their approach to client interactions would shift to remote communications or a mix of in-person and remote communication. About 79% of respondents reported making additional investments to support remote work processes, such as video tools, upgraded network services, security, and automated customer service. All respondents indicated call volumes jumped at least 20% at the start of the pandemic.

Emphasis on holistic planning and advice

Firms are reducing their reliance on a product-led strategy to drive growth and instead emphasizing advice that integrates a suite of financial services provided internally or with partners.

A meeting with a financial advisor can easily lead to a cross-discussion of the importance of healthcare planning, changing insurance needs, and even strategies for participating in cryptocurrency markets. To find new growth areas, wealth advisors need to attract younger clients and target underserved markets.

There’s widespread agreement that the mass affluent market will continue growing, with 90% of respondents saying they expect to see a continued expansion of services offered into banking, insurance, and other financial services products.

Work with clients anywhere

Geographic location matters less, in part due to improving communications technology. Regional banks, who have traditionally prospected only in their backyards, can now serve wealthy clients in areas even where they do not have a physical office or branch.

This is especially important as an increasing number of workers are freed up to perform their jobs from anywhere, and move their homes across states or countries. Accommodating the client’s growing expectation for hyper-personalization. Face-to-face prioritization is taking a backseat to remote communication and hybrid models.

Over 67% of wealth managers said they have taken major initiatives in artificial intelligence (AI) and data analytics to support decision-making and automation for investment management. Most wealth management firms are following a hybrid approach, teaming some degree of AI smarts with human advisors to hyper-personalized offerings for customer segments.