The financial crisis of 2008, when the S&P 500 lost 39.2% in value, and the ensuing market volatility in the three years since, have served as a sobering wake-up call for the wealth management industry. And now it's dramatically changing the way it plans to do business in the years ahead.

This is according to a new report from Ernst & Young, titled "Investing in the Future: A Focus on Wealth Management Product and Client Trends."

Now, wealth managers very carefully review the performance and risk levels of their entire product lineups -- annually. Some are even moving towards quarterly product reviews.

Before 2008, they would analyze the potential for a new product idea, launch it and revisit it only if it trailed it is benchmark over several years. With the focus on new rather than existing products, only in a small percentage of cases would a fund be closed or merged into another.

At the same time this diligent paring down is going on, a seemingly counterintuitive trend is happening: more open architecture. This is where asset managers partner with other wealth managers to offer their products alongside their own. Investment firms are doing this through jointly developed and managed funds, sub-advised funds that are run by an outside manager and, increasingly, separately managed or unified managed accounts that integrate various types of investment products, such as equity mutual funds and alternative investments, into one portfolio.

These were two of the key findings in the Ernst & Young report, based on a survey of 39 high-level investment professionals conducted by Greenwich Associates in April and May.

The executives were with companies with at least $1 billion in assets under management, and in some cases, more than $500 billion. Fifty-six percent of the firms target high-net-worth clients with more than $1 million in investable assets, 18% serve mass affluent individuals with $250,000 to $1 million in investable assets, and the remaining 26% are focused on the mass market, people with less than $250,000 in investable assets.

"The move to open architecture is being driven by client demand," said Anthony Caterino, a partner with Ernst & Young's Financial Services Office.

"While we didn't ask respondents if the increased demand for open architecture is being driven by the search for best-of-breed, competitive fees" or new types of investment approaches, such as tactical asset allocation or absolute-return funds, "those certainly could all be reasons," Caterino said.

Another reason firms could be casting a wider net through open architecture: asset managers are starting to segment their clients into more refined, sophisticated classifications, going beyond the traditional income, age and risk tolerance approach -- to assess an investor's life stages, marital status and other, richer demographic classifications, such as their motivations and attitudes towards money and saving.

"For the next two to five years, the general consensus among investment management professionals was expanded open architecture, more investment product offerings and broader client coverage across multiple client segments with a unique service model for each," Caterino said.

In terms of the specific numbers, the survey showed that 79% are planning to expand their open architecture in the next two to five years. Sixty-eight percent are working on an expanded product offering across a wide range of products, and 71% are eyeing broader client coverage across multiple segments.

Eighty-four percent say their firm now has annual product reviews-but only 15% consider the process to be highly effective.

"This suggests clear opportunities to identify and develop best practices to ensure they are adding the right products to the platform," Caterino said.

-- This article first appeared on Money Management Executive.