To not only survive, but thrive in 2012 and beyond, planners need to do two tricky things exceptionally well simultaneously: reduce expenses and increase their technology and mobile capabilities to engage younger, tech savvy clients.

That’s according to a new study by the independent Boston-based research firm Aité Group, which identified its Top 10 trends in wealth management for 2012.

“Wealth managers must reinvent their business models to accommodate the need for more direct access to information,” said Alois Pirker, Aité’s director of research For this reason, advisors with custodial and clearing firms that have developed strong retail, direct-to-consumer functionality may be best positioned in the market, Pirker said. He cited Fidelity’s retail arm and Merrill Lynch’s Merrill Edge as examples.

“It’s an interesting thing that the consumer space is leading the advisor space,” Pirker said. “They can translate those direct-to-consumer solutions (for advisors). Those firms could wind up much further ahead.”

One key factor will be whether more custody and clearing firms decide to make more of their retail tools available to their advisor communities, he said.

Driving these trends, Pirker said, is clients who are demanding more control over their accounts.

“The direct-to-consumer firms have really benefitted from the consumers pushing them,” he said. “It’s all about knowing how to build stable mobile apps. Once you (roll out an app), you have tens of thousands or even hundreds of thousands of consumers using it. It’s a challenging test environment because you are going to hear if it doesn’t work.”

Overall, the Aité study found that the wealth management industry has undergone radical shifts since the economic downturn of 2008. The study predicted that in 2012 there will be:

-- Continuing reshuffling in the market, with more acquisitions, mergers and breakaways.

-- Ongoing profitability pressure due, in part, to an increase in wealth management players. One result: more outsourcing.

-- More wealth management revenue for banks as they deepen relationships with mass affluent and HNW client.

-- Ongoing business model changes, including new pricing and delivery of wealth management services, partly in response to a coming fiduciary standard.

-- More self-directed investing. Online trading platforms are no longer the province of the young and less-wealthy.

-- The continuation of a less-than-ideal investment climate. A disconnect between what investors want and what traditional wealth management can offer is pushing more clients into gold and other nontraditional investments.

-- More copy trading, which will make serious inroads into retail trading this year.

-- More retirement initiatives for the mass affluent as 8,000 boomers a day, through 2029, reach the traditional retirement age of 65.

-- More advisors seeking greater control, especially in response to client demands for responsiveness in an era of market volatility.

-- More mobile initiatives. Within the wealth management industry, only brokerage firms have emerged as early moves with applications for mobile phones and tablet computers.

Ann Marsh writes for Financial Planning.


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