In the face of a rapidly changing financial landscape, wealth management firms are poised to undergo a significant transformation. A recent study, spearheaded 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 shift, with digital innovation and artificial intelligence (AI) becoming critical components of prosperity.

The comprehensive analysis, which incorporated insights from 250 wealth management firms and feedback from 2,000 investors globally, indicates that 55% of executives anticipate born-digital firms will significantly transform the wealth industry. Moreover, 52% of wealth management firms at the forefront of digital transformation foresee a dramatic industry reconfiguration.

A remarkable 69% of executives are convinced that AI will alter their firms’ operations substantially. Simultaneously, 47% predict that blockchain and related technologies will minimize the need for intermediaries like custodians and clearinghouses, underscoring the increasing relevance of decentralization in financial services.

Executives also forecast a trend toward commoditization of most products, compelling providers to offer value-added services to justify fees. Additionally, 39% anticipate the lines between wealth management, banking, and insurance will blur as investors demand more integrated financial solutions.

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

In response to these evolving dynamics, investment providers are elevating technology to a core competency, with a vast majority advancing towards or already implementing modernized, cloud-based platforms. These platforms enable wealth management firms to digitize operations, reduce costs, devise new business models, and tap into novel revenue streams.

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

Louis Celi, CEO of ThoughtLab and director of the study, emphasizes the importance of understanding future investor expectations and behaviors to ensure client satisfaction. He stresses that wealth management firms must reconsider their offerings, workflows, business models, and digital strategies to become future-ready.

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

Digitize client advice and experience.

Capitalize on client diversity for business growth.

Harness AI and digital innovation for performance enhancement.

Innovate offerings to meet future investing demands.

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

To delve deeper into the study’s findings and explore the 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.

Image source: Shutterstock