To meet consumers’ changing needs, wealth management firms in the U.S. and Canada are poised to move their digital plans from theory to action in 2021, according to analysts at Forrester Research Inc.
Financial firms “have that transformation plan on the whiteboard” and are poised to push it forward and start implementing those plans in 2021, says Vijay Raghavan, senior analyst with Forrester.
In its recent report, Predictions 2021: Wealth Management, Forrester outlines three potential shifts in the wealth management industry in the U.S. These changes include making investing easier for consumers, greater client acquisition but not much more revenue, and a growing demand for environmental, social and governance (ESG) investments.
In terms of ease of investment, Forrester predicts incumbent firms will put more resources into improving and digitizing their client onboarding processes. Besides needing to keep up with wealthtech startups such as Betterment and Wealthsimple, which have easy-to-use onboarding processes, firms must adapt so as to meet their own client acquisition goals — something much harder to do when meetings aren’t face-to-face.
“With Covid-19 it’s becoming so difficult to drive client acquisition through the traditional channels,” says Raghavan, “especially when we’re talking about wealth management and financial advisors who routinely develop that rapport in a face-to-face setting, whether it’s at a Starbucks or a retail branch.”
Digital tools will also be important in the coming years to maintain client relationships. For example, adopting video conferencing or using SMS or screen-sharing options will help advisors keep in touch with clients.
As well, Forrester notes that in 2021 firms will have to look for “omni-channel” solutions for clients, meaning companies will need to expand their relationships with customers to other services, given the downward trend in investment fees. For example, Goldman Sachs plans to launch a digital wealth management service, and clients who sign up for that product may then be directed to other parts of the company, such as applying for a loan through its online bank, Marcus.
For advisors, the drive in lower fees means they’ll need to create efficiency through the use of digital tools, says Raghavan. For example, advisors may turn to products to help automate client meeting preparation, such as analyzing details like age and risk tolerance to provide personalized investment advice.
Finally, the wealth management industry will likely see a continued push in ESG-related products in 2021, says Forrester. As such, the research firm predicts that wealth managers will improve their platforms to track clients’ ESG goals and help advisors talk to clients about these investments.
“Many of these platforms that are in existence today don’t necessarily have some of these capabilities available,” says Raghavan.
Firms that develop such capabilities “are the ones that are going to enhance the relationship for customers.”