8 Wealth Management Trends for 2016
December 28, 2015 4:57 PM
8 Wealth Management Trends for 2016
The coming year will bring rapid changes in technology, regulations and M&A, among others. But which trends will have the biggest impact on your business and clients? Weve done the heavy lifting for you, so you can stay ahead of your competition. Here are the trends to watch in 2016.
Read more:
Read more:
- Robos: It Is No Longer a Question of Whether but How to Use Them
- With Looming M&A Deals, Should Advisors Stay or Go?
Is the Solo Advisor the New Old School?
Wealth Grows Faster in TX and CA
Two words - Texas and California.
Half of the fastest growing metropolitan areas measured for population and investable dollars of individuals with more than $1 million to invest are located in those two states, according to Capgemini's U.S. Wealth report for 2015.
Wealth grew over 15% in Houston, 12.5% in San Jose, 12.4% in Dallas and 12.3% in San Francisco
Expect more of the same in 2016, says David Wilson, head of Capgemini Financial Services strategic analysis group.
"These markets are some of the most dynamic for wealth creation in the U.S.," Wilson explains. "They include the dynamic technology scene in the Bay Area and the robust economies we see in Houston and Dallas, which are not just about oil and gas. These markets are all benefitting from robust economic growth, low unemployment and strong performing asset classes such as real estate.
Following the Money: Cities Where Wealth is Growing Fastest
Half of the fastest growing metropolitan areas measured for population and investable dollars of individuals with more than $1 million to invest are located in those two states, according to Capgemini's U.S. Wealth report for 2015.
Wealth grew over 15% in Houston, 12.5% in San Jose, 12.4% in Dallas and 12.3% in San Francisco
Expect more of the same in 2016, says David Wilson, head of Capgemini Financial Services strategic analysis group.
"These markets are some of the most dynamic for wealth creation in the U.S.," Wilson explains. "They include the dynamic technology scene in the Bay Area and the robust economies we see in Houston and Dallas, which are not just about oil and gas. These markets are all benefitting from robust economic growth, low unemployment and strong performing asset classes such as real estate.
Following the Money: Cities Where Wealth is Growing Fastest
Young Clients Carry More Clout
The good news: The number of individuals with $1 million or more to invest rose to a record 4.4 million, as their investable wealth increased to $15.2 trillion, also an all-time high, according to Capgemini's 2015 U.S. Wealth Report.
The bad news: Those numbers include increasingly younger clients. The long-term outlook for wealth managers who will deal with this youthful generation is "scary" because that group is less loyal to its advisors, says David Wilson, head of Capgemini Financial Services strategic analysis group.
The best news: Advisors can do something about it. Here's what younger clients want, according to Capgemini:
* Digital automated advice platforms.
* Access to credit and mobile applications.
* Digital interaction with their advisors.
* Diverse portfolios that include real estate and global investments.
* Attention to the social impact of their investments.
The bad news: Those numbers include increasingly younger clients. The long-term outlook for wealth managers who will deal with this youthful generation is "scary" because that group is less loyal to its advisors, says David Wilson, head of Capgemini Financial Services strategic analysis group.
The best news: Advisors can do something about it. Here's what younger clients want, according to Capgemini:
* Digital automated advice platforms.
* Access to credit and mobile applications.
* Digital interaction with their advisors.
* Diverse portfolios that include real estate and global investments.
* Attention to the social impact of their investments.
Number of Retirees Skyrockets
The number of U.S. retirees is expected to rise 40%, to 66 million, over the next decade, according to a recent LIMRA Secure Retirement Institute analysis. In 2014, nearly 3.4 million baby boomers turned 65 thats almost 10,000 a day, says the insurance research and industry trade group. The number of Americans reaching age 65 will continue to rise each year, reaching 4 million a year by 2020, and will remain at that level until 2030, according to LIMRA.
M&A Market for RIAs Heats Up
"Buyers are still attracted to wealth management, says Elizabeth Nesvold, managing partner at Silver Lane Advisors, a prominent New York investment banking firm. They see the average RIA growing at 15% plus in a minimally capital intensive business, and baby boomer demographics driving the need for financial and estate planning advice.
Strong valuations for RIAs, reliable cash flow, low interest rates and pent-up demand are also driving the market, according to industry executives.
Look for tech-savvy firms and RIAs with between $250 million and $500 million in assets to be targets, pursued by larger firms, roll-ups and private equity buyers.
Strong valuations for RIAs, reliable cash flow, low interest rates and pent-up demand are also driving the market, according to industry executives.
Look for tech-savvy firms and RIAs with between $250 million and $500 million in assets to be targets, pursued by larger firms, roll-ups and private equity buyers.
IBDs to Find Buyers
All signs are pointing to sales of Cetera Financial Group and AIG Advisor Group in 2016.
Private equity firms are poised to snap up IBDs. Case in point: Lightyear Capital — which once owned Cetera and sold the large independent broker-dealer to RCS Capital for $1.5 billion in 2014 — appears to be on the verge of acquiring AIG Advisor Group.
Other big-time PE firms to watch for include Lovell Minnick Partners, Hellman & Friedman, TA Associates and Aquiline Capital Partners.
More Questions Pop Up Around Robos
The SEC and other regulators are signaling that they will start examining robos more closely in 2016. Robo firms may be called upon to further demonstrate how they meet the fiduciary duty.
What does a fiduciary duty even look like or mean for a robo advisor? SEC Commissioner Kara Stein asked an audience at Harvard Law School in November.
What does a fiduciary duty even look like or mean for a robo advisor? SEC Commissioner Kara Stein asked an audience at Harvard Law School in November.
Social Media Rules May Be Changing
The wirehouses and major regional broker-dealers may have to make compliance adjustments for advisors who use social media, to meet heightened restrictions that may come with a fiduciary standard.
"It will be interesting to see just how far broker-dealers will push the envelope to allow their advisors more freedom on social media," says Mark Elzweig, who runs a recruiting firm under his own name in New York. "Employee advisors need to be able to compete with independents and RIAs who have broader latitude.
"It will be interesting to see just how far broker-dealers will push the envelope to allow their advisors more freedom on social media," says Mark Elzweig, who runs a recruiting firm under his own name in New York. "Employee advisors need to be able to compete with independents and RIAs who have broader latitude.
Cyberattacks Heat Up
Cybersecurity is a huge, huge, huge issue, says John Burns, co-CEO of Exencial Wealth Advisors.
Criminals are breaking into firms servers and lurking for weeks, even months. They harvest account numbers and other customer information, then either send realistic-looking emails or call advisors directly to request wire transfers or stock transactions.
In coming months, advisors must be clear with clients how the firm will handle cybercrime and who is liable after a fraudulent transaction. Counterfeit transactions are not automatically refunded. First, it must be determined if the security breach was the fault of the client, the bank or the advisory firm. Only then can the transaction be potentially reimbursed or reversed. Also, advisors must be especially wary of all phone calls that request an emergency transfer of funds.
Image: Charles Schwab
Criminals are breaking into firms servers and lurking for weeks, even months. They harvest account numbers and other customer information, then either send realistic-looking emails or call advisors directly to request wire transfers or stock transactions.
In coming months, advisors must be clear with clients how the firm will handle cybercrime and who is liable after a fraudulent transaction. Counterfeit transactions are not automatically refunded. First, it must be determined if the security breach was the fault of the client, the bank or the advisory firm. Only then can the transaction be potentially reimbursed or reversed. Also, advisors must be especially wary of all phone calls that request an emergency transfer of funds.
Image: Charles Schwab
