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Joe Duran, Head of Personal Financial Management, Goldman Sachs
“There is immense competition in the high-net-worth space, market share races are leading to heated acquisition activity and large firms are zeroing in on organic growth through retirement plan participants. 2021 will be the year where winning with clients will mean going beyond investing and planning. Providing banking, estate planning and tax education all coordinated and delivered in a personal way and powered by an integrated digitally powered platform is how you become indispensable to clients. But figuring out which market segment you can dominate and own so that you can experience organic growth becomes increasingly important when acquisition pricing keeps surging.
Firms will continue to invest in their platforms across talent, tech, risk and compliance, but they must also broaden the services offered to win and retain business. It requires firms to have the experience, patience and the capital necessary to make these investments while continuing to run a successful business—which is no easy feat.”
Eric Clarke, CEO, Orion Advisor Solutions
“2021 will be the year for our industry to finally tackle the investor problem, not the investment problem. Advisors have heard financial services leaders talk a good game for years about holistic service, but the pandemic truly opened the door for a higher standard of client experience, thanks to the rapid adoption of key tech and processes. Direct indexing had a great year, for example, and we think more advisors will turn to it as a way to offer tailored service at scale. We’ll also see the impact of significant regulatory and tax policy changes. The Biden administration is certain to revisit the fiduciary standard, and any tax changes will have repercussions in areas like estate planning. Staying ahead of these trends will be a top priority for advisors in the months to come. “
Brian Hamburger, President & CEO, MarketCounsel
“The global pandemic has brought us all a sense of humility and served as a reminder of the sensitive ecosystem in which we operate. To that end, it will take all of us to ensure that the prominence and trajectory of independent wealth management continues. Because one thing’s for sure, advisors’ counterparts in the financial services industry want what advisors have.
Here’s what I hope for in 2021: I hope advisors give their own business the same care and analysis that they give to other equity investments, make the same type of investment in themselves that they make in others, and make principled decisions when the decision rests with them. Major conflicts of interests may be disclosable but they erode client trust. I hope custodians, platforms and service providers continue to innovate and allow for scalable (read: small and large) solutions. We shouldn’t misinterpret scale to only mean that solutions should be geared to larger, enterprise firms. I hope the regulators counteract the harm they caused to independent investment advisers with their recent regulations by finally modernizing investment advisor rules. I hope the media covers industry developments with increased sophistication, from headline numbers in M&A transactions to the misdeeds of an enforcement action. Advisors need information that’s actionable and full of translatable lessons. Most of all, I hope that we can physically come together in 2021. I’m grateful for the means to connect virtually but it is by no means a replacement for a handshake and face time (not, FaceTime). I’ll see you at MarketCounsel Summit 2021!”
Manish Khatta, Chief Investment Officer, Potomac Fund Management
“In 2021, we will see sub-$100 million wealth managers continue to revolt, seeking intermediaries who can successfully act as a mid/back office and relieve their burden. They will seek human interaction over chat bots. They will seek someone who cares. It sounds funny, but customer service will be back in vogue. With large financial firm consolidation continuing, customer service will suffer, as will the smallest RIAs. Large firms value an RIA’s business up until they figure out you won’t be a billion-dollar firm. Who decided that’s the benchmark for success, or being treated like a valued customer? 2021 will be the ‘Year of the Small, Agile and Nimble’ advisor. Take that power back.”
Aaron Klein, CEO, Riskalyze
“2021 will play host to a heightened set of client expectations. Coming out of a year when everyone assessed risk before heading to the grocery store, investors are looking for data to make sense of the world. Anything less than the most intuitive illustration of what is ‘normal’ for their portfolio will leave clients fearful—either of loss, or of missing out.”
Loreen Gilbert, CEO, WealthWise Financial Services
“I expect to see Amazon entering the wealth management space on the low end of the market, capturing market share from traditional wealth managers. The financial planners who survive over the next decade will be those advisors who specialize with a niche clientele and who are able to personalize an experience that cannot be replicated by AI.
Meanwhile, the new administration will usher in mandates and increased regulations across a variety of industries, notably the financial services industry. I expect to see an active DOL and SEC scrutinizing the financial services industry with increased regulatory and punitive measures going forward. The additional regulations will drive up costs on everything from trading to E&O insurance. Ultimately, that will increase practice management costs and lower the profitability of both broker/dealers and financial advisors.”
Aaron Schumm, Founder and CEO, Vestwell
“Between SECURE Act incentives and state mandates and an accelerated movement to lead with digital engagement in the COVID era, we are seeing a dramatic leap of new retirement plan business. I believe this trend will continue for the foreseeable future. But as advisor interests bring them closer to the participant, efficiency will become even more imperative to scale. Being able to sell, manage and invest in a fully digital capacity is now table stakes, and advisors that can leverage the right technology and tools, will have a leg up in 2021 and beyond. The good news for advisors is that plan participants are becoming more attuned to the important role they play. With an increased focus on personal finance and financial education, more employees than ever are welcoming financial advice. In fact, our 2020 Employee Retirement Trends Report uncovered that while only 41% of plan advisors reached out to participants in 2020, 70% of those participants welcomed the outreach. This highlights a tremendous opportunity for advisors who see engaging at the workplace as central to their value proposition.”
Peter Krull, Founder, CEO & Director of Investments, Earth Equity Advisors
“In 2021, we’ll continue to see unprecedented growth in the SRI/ESG space. With President-elect Biden moving into the White House, all indications are that his administration will focus on climate change and other environmental issues. That should be good for sustainable stocks. In addition, we should see a repeal of the Labor Department’s rule discouraging SRI/ESG investing. According to the recent US SIF biennial report, one in three professionally managed investment dollars in the United States is in a sustainable strategy. Investors will also continue divesting from fossil fuels, with institutional investors joining a movement largely started by universities, small institutions and retail investors.”
Matthew Bellows, Co-founder and CEO, BodesWell.io
“The manner in which financial products are sold is changing. Just as it transformed bookstores and travel purchases, ecommerce is coming for retirement, insurance and investments. What’s slowed that transition, until 2020, was the complexity and cost of financial products compared to books and airplane tickets. The customer journey has to be reimagined— but that’s happening now. If you are in your 60s and thinking about selling your wealth management book of business, computers won’t eat your lunch. But if you are taking over the firm, it’s time to build differentiated skills that take ecommerce into account. The pandemic has accelerated a software-based combination of financial planning, account aggregation, future wealth projection and product comparisons. The good news: it will be a long time before an advisor’s empathy, creativity and emotional intelligence can be replaced. 2021 is the year to focus on the human element. Software is going to take care of everything else.”
Dafina Dunmore, Director, Non-Bank Financial Institutions, Fitch Ratings
“The continued shift of investor demand for alternative assets is expected to persist in 2021, driven by lower-for-longer interest rates. Investment opportunities are expected to pick up, as potential distressed assets emerge—or valuations drop. That said, lower valuations would create a challenging investment backdrop for realizations, which will likely remain relatively lumpy and below historical levels in the near term. While Fitch expects the new administration to ultimately favor an expanded role for the U.S. government in regulating private equity, the scope and timing remain uncertain, given Fitch’s expectation of a divided U.S. Congress, which would likely stall any consequential tax legislation in the near term.”
Jonathan Foster, CEO, Angeles Wealth Management
“2020 has been a forgettable year for the human condition and political discourse. However, it has been a memorable year in the wealth management business. It will be much the same in 2021. This is a year of the “Have and Have Nots.” A number of wealth management firms are also experiencing phenomenal organic growth, while others have been weathering significant client outflows. What has made the difference? I think it comes down to two issues: communication and asset allocation. Firms which excel at proactive client communication were able to lead clients during the dark market days of the spring of 2020. In my experience, if a client calls saying, “I haven’t heard from you, what do you think about the market?” then you are too late. It’s over. With regards to asset allocation, firms with a rigid approach (value investing, for example) have possibly delivered massive underperformance … and clients have noticed. After all, they are all sitting at home with extra time on their hands. Here again, if the client calls saying, “I see the market is up on the year. Why am I down 20%?” you are done. It’s over. In the words of that famous investment guru, Vladimir Lenin, “There are decades where nothing happens, and weeks where decades happen.”
Jonathan Gibbons, Founder, vigtec.io
“We predict that 2021 will see the return of the active manager. It’s a distinct possibility and here’s why: During the 2010s, volatility suppression schema—whether enacted by outright volatility targeting via short volatility, stock buybacks or options targeting strategies seeking yield enhancement in a zero-bound world—became very popular and supported (if not enabled) by prolonged periods of ultra-loose (low interest rate) monetary policy. Active management becomes unnecessary in this type of environment as there’s simply no volatility to navigate, which creates limited necessary experiential and/or judgment decisions to be made. When all ‘cross-asset’ classes rise in unison, what rebalancing does need to take place is done fairly easily through algorithmic logic programs. This led the rise in exchange traded funds that are primarily built and managed via algorithmic rules. When you combine this with the growth of robo advisors and free trading apps (like Robinhood and Webull), you get even more inflows into ETFs (as passive vehicles are the No. 1 choice of robo advisors and free trading app users). You get large outflows from mutual funds (active management) and a general perception of them being an ‘archaic vehicle.’ This will change in 2021.”
A. Valerie Mirko Partner, North America Financial Regulation and Enforcement Practice, Baker McKenzie
“Regardless of who is selected as SEC Chair, I expect the commission under the Biden-Harris administration to continue to emphasize the protection of retail investors and market integrity while giving greater weight to ESG matters. An ESG focus is in line with the four priorities the incoming administration announced in November―COVID-19, economic recovery, racial equity and climate change―and Commissioner Lee has emphasized climate change in recent months. Costs, fees and conflicts should be top of mind for broker/dealers and investment advisers, but the financial industry as a whole should be particularly aware of its retail and consumer touchpoints and assess regulatory and enforcement risk accordingly. Data-driven SEC enforcement initiatives will also continue. Separately, I also expect the CFPB to have a more prominent future role, giving that the Biden-Harris transition team dedicated a 10-person review team solely to the CFPB.”
Paul Saganey, Founder and President, Integrated Partners
“In 2020, the wealth management industry and the world developed a greater appreciation for the value of time. If we aim to extract ourselves from this messy year and thrive going forward, 2021 is going to be the ‘Year of the Entrepreneur.’ We have spent 2020 learning to rely more heavily on technology, like Zoom, which has demonstrated that if deployed consistently, it gives entrepreneurs more time and flexibility in terms of how they build and grow their businesses. More time to focus, more time to imagine and more time to reinvent. Independent wealth managers are entrepreneurs. At the end of the day, this business is all about relationships. Those relationships, fueled by our newfound utilization of technologies, will be augmented; the entrepreneurial wealth manager that successfully harnesses these new capabilities will see their businesses rise to new heights of success.”
Jarrod Upton, Partner, Herbers & Company
“2020 was a year filled with advisory firm innovations, and Herbers & Company anticipates a huge ripple effect in 2021 due to these developments. Digital client experience (DCX) models and virtual client onboarding innovations proved that the fastest-growing firms are those serving the mass affluent, under retainer-based models that are wildly profitable with new virtual technologies and employees. In 2021, the new service model for advisory firms is going to be serving all clients, not simply the wealthy, and we are already seeing a dramatic shift happening as “wealth management only” firms reposition themselves to provide financial planning and investment management to all size clients. Herbers & Company predicts that advisory firms have no choice other than to reinvest and reinvent themselves because the future of independent advice is serving all people profitability. If advisory firms want to keep growing and competing, DCX models must be implemented to help any type of client, anywhere, with employees who are wanting to work everywhere.”
Don Bennyhoff, Investment Committee Chairman and Director of Investor Education, Portfolio Solutions
“For 2021, we expect smaller advisory firms to outcompete the industry’s mega firms for the hearts and minds of wealthy investors. The resources available today—from information security to access to investments—is unrivaled in years past, allowing investors to set aside the ‘big-box store approach’ without having to sacrifice for the bespoke experience. And an increased understanding of the meaning of fiduciary wealth management should only enhance the appeal of those firms committed to the client’s best interest.”
Will Trout, Director of Wealth Management, Javelin Strategy and Research
“Developments that made the past 12 months a watershed year for wealth management are set to transform the industry in 2021. These include fractional share trading and direct indexing strategies enabled by the adoption of zero-commission trades. ESG represents another trend with implications for the economics of the business.
Some wealth managers will stumble in the face of commoditization. Others will overcome high fixed costs by rethinking their propositions in a way that speaks to client needs. A first step is to understand the social and demographic trends that are leveling the wealth management landscape.
Already, the acceleration of the digital learning curve sparked by the COVID-19 pandemic has upended the contract between client and advisor. Understanding will shift further as firms rethink approaches to segmentation and servicing. The real game changer will be the ascendance of a new generation of affluent clients, for whom technology will be a critical lever to connect. More than ever, the ability to deliver a personalized (and thus, digital) client experience will emerge as the element that differentiates among wealth managers.”
Rich Napolitano, CEO, Advisor360
“The lack of face-to-face interaction in 2020 has had a dramatic impact on how wealth management firms establish relationships and build trust with their clients. These changing advisor/investor dynamics have resulted in a greater emphasis on collaboration tools in the industry. Whether it’s an improvised solution for communicating on investment decisions or a new tool for document collaboration from a compliance standpoint, firms are pushing the boundaries of how to digitally transform their businesses.
As the industry trends toward full digitization, larger enterprises are facing pressure to ensure the technology resources they offer advisors are flexible, customizable and able to integrate into the various systems advisors use throughout the day. Tech solutions shouldn’t just make the job easier, but actually help advisors enhance productivity, which at the end of the day means bringing on more assets. Without tools to help advisors build their books of businesses, enterprises won’t be able to attract the best RIAs and broker-dealers in the industry. Firms that prioritize enhancing their wealthtech tools in 2021 will be better positioned for success.”
Brian Edelman, CEO, FCI
"Continuing the trend identified this year; consumers are likely to experience more personal cybersecurity breaches in the new year.
A data breach can swiftly change everything. Once it has happened, consumers do not know who to trust for advice and what actions to take. They scramble to perform emergency damage control including reaching out to police, FBI and vendors, changing passwords on multiple platforms, filling out paperwork, etc.
Too often the value of cybersecurity becomes clear only in hindsight after experiencing the devastation and helplessness that accompany the reality of a data breach. While we are seeing a definite rise in cyber threats, there is also increased awareness. Consumers are becoming more cognizant about protecting personal data, which impacts the industry as a whole. Consumers, regulators and financial institutions are all asking more questions of advisors about how they protect private information. Our wish for 2021 is that advisors adhere to strong cybersecurity practices to best protect and gain the confidence of their clients."