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Getting Ahead of Macro Trends in Wealth Management



In a recent PwC survey, wealth managers listed three top industry trends: 

  1. Improved risk analytics
  2. Automation of asset allocation and how wealth is managed
  3. Shift from technology-enabled human relationships to digital experiences with human support

Trends 2 and 3 really caught our attention.

Let's start with "Automation of asset allocation and how wealth is being managed." We can contribute to this automation conversation by presenting some numbers.

On the Smartleaf platform, one wealth manager is now rebalancing over 10,000 customized, tax-sensitive accounts. Computers are already better than portfolio managers at disciplined rebalancing of portfolios — meaning cash, tax, drift, and constraint management. This means that it's something advisors should no longer be doing by hand. Any firm that devotes substantial time to manual rebalancing is going to have trouble competing with firms that have their advisors doing what's more valuable — giving personal advice to their clients.

We can also shed some light on the meaning of the second trend, the “Shift from technology-enabled human relationships to digital experiences with human support”. Today, many firms offer a “digital experience” that’s little more than a data depository and info center — a place to download statements and get basic information. It’s seen as a sideshow to the “real” service. We believe the next generation of digital experience will change wealth management in three fundamental ways:

It will create a radical transparency into what advisors do and the value they add. Portfolio management is opaque to most investors, but technology now exists that enables firms to show what they do, every day — daily portfolio analysis, explanations of trades, and summary of value added. Investors will demand this clearer window into how their wealth is being managed. 

It will permit higher-value, lower-cost self-service. For example, if an investor wants to withdraw funds, they will be able to see in real time what this will cost in taxes. This type of all-digital interaction can be better, more convenient and faster for both the investor and their advisor. When it comes to servicing requests through a digital portal, low cost and high quality are not in opposition.

It will create and support richer, more meaningful relationships between clients and advisors. This may seem counter intuitive, but showing work and value will build trust, and a rich digital experience means conversations will happen when the client needs them, not just because another calendar quarter has passed.

These macro trends – greater automation and richer digital experiences – will benefit both clients and advisors. Clients will get better service. And advisors will get to focus on what really adds value — providing guidance to their clients.


For more on this topic, check out Automated Rebalancing & Specialization.


President, Co-Founder