Bill Hortz's picture

[The key to business success - especially in a hyper-competitive operating environment driven by accelerating rates of change like ours -  relies on strategies that are built firmly around and stay very close to your clients. Changing investment options, service delivery systems, client engagement tools, and enhancements to holistic advice are altering the way consumers look at financial services and their expectations of wealth management advisors and firms. This opens up great competitive opportunities but they must be forged by truly being client-driven. The history of successful business model innovation demonstrates how to innovate from your clients, not just from a corner office vision.

In order to do so, you need to speak openly with your clients and studiously leverage that first-hand knowledge with relevant ongoing client research being done on your marketplace. Only from this informed reality can you know the solid steps you need to take towards reinventing your firm, transforming your operations, and fine-tuning your business model innovation efforts. Understanding changing client needs and new operating dynamics can help guide you in developing a strategic road map and the best next steps for competitive positioning and deep client engagement.

One great source of Wealth Management industry research is provided by Accenture - a global professional services company that provides a wide range of end-to-end business services and solutions with five main practice areas in strategy, consulting, digital, technology, and operations across 40 industry sectors. They work “driving change globally” and “helping clients create their futures” supported by their global network of Advanced Technology and Intelligent Operations centers.

An Accenture Wealth management consumer study entitled Wealth Management: The new state of advice spotlights the rise of newly engaged investors with growing financial advice needs and wants. The Study reports that investors want holistic advice that moves beyond just investments and is delivered within the right context of a client's financial, emotional, and social goals. It also clearly shows that financial firms need a robust digital and personal engagement business model that is powered by analytics to deliver against clients’ changing expectations.

We reached out to Scott Reddel, Global Wealth Management practice lead at Accenture, to learn more about their research activities in Wealth Management, the changing dynamics around “advice” in the industry, and the three trends they have identified that will most greatly shape the industry in 2024 – longevity, generative AI, and the changing advisor workforce. Scott shares his real-world industry perspective based on his work with leading financial firms and advisors and his firm’s extensive research on global wealth management trends.]


Hortz: Can you explain the range and depth of the work that Accenture does in the Wealth Management area? What kind of research and activities does your firm perform in this space?

Reddel: Accenture is a massive business consulting and solutions firm that has an extensive global and cross-industry perspective on change and change management. I run our wealth management area globally within our Capital Markets group and, for us, Wealth Management is really about “advice” as a horizontal across financial services. We span the range of traditional wealth managers, defined contribution, benefit providers, banks, insurers, all these types of firms that provide financial advice. That is the focus of my area.

Typically, our sweet spot, in terms of the work we do, is really about driving transformation and increasing business reinvention. Key topics we cover include how digital transformation is enabling more capabilities for advisors, but increasingly we are covering how do you reinvent your business model to deliver different types of advice, monetize that, and so forth. We use our research to really help drive and accelerate that change.

Our research activities include doing periodic surveys with advisors and their clients. Advisor surveys look at what advisors want and need from “advice” delivery and capability enablement. I would say increasingly we are doing a lot of work and research around generative AI and what is the role of AI for advisors because of the demand there, but then also looking at the ecosystem and our ecosystem partners (be it technology firms, product firms, other innovations) and examine how they are being used and applied to the industry.

Hortz: Do you openly share any of your wealth management industry research and where is it accessible?

Reddel: We maintain a public Capital Markets blog site where we post a great deal of our research. We also push out research on LinkedIn as well, so our research is readily available for industry leaders and wealth managers to use in their planning and strategy development.

We do our own primary research but we also have a set of research partners. As an example, with the World Economic Forum, we run their Future of Capital Market series among a number of ongoing research with them like just publishing a paper on the Broadening Access to Private Markets. We also have a relationship with University of Chicago Booth and a couple of other academic institutions where that research is not always on our website, but we will push it out in different forums based on the topics being explored there.

Hortz: What does your latest research say about the state of the overall wealth management industry in 2023?

Reddel:  Wealth management is an industry that has been dealing with change for a long time. The way we see this is that we are somewhat midway through this reinvention from legacy advice models to new advice models. Increasingly, that seems to frame everything our clients are thinking about.

Overall, what we are seeing, even with all the market volatility, is that the industry is still a pretty resilient, attractive market for our financial services clients. They are increasingly investing in prioritizing the advice part of their business within their overall portfolio of client services recognizing that advice and the wealth management relationship is really accretive to the rest of their business. As an example, banks and insurers recognize that if they can lead with an advice or planning approach, their clients become a stickier, higher value relationship across all their products and services. This has become a durable perspective in terms of how our clients are thinking about the industry.

What our research tells us is that what continues to challenge the industry is the increasing demands from clients - what they are expecting, what they are willing to pay for, and the challenge just to deliver that from an effective cost basis. A lot of the operational and business model transformation happening today is being driven by these questions of how we deliver this and scale it profitably.

Hortz: What do you see as the growth prospects of the wealth management industry overall and what is driving it?

Reddel: We are seeing industry growth quite positively. The $128 trillion in intergenerational wealth transfer expected will be trickling through the industry and that is leading to prospect acquisition growth, a large shift in share of wallet, and where assets are flowing.

I think what is interesting is the shape of where that growth is going as we are seeing consolidation at the largest players. Morgan Stanley, Fidelity, Vanguard, Schwab are continuing to grow. The independent space is also continuing to grow, but consolidating as well, so that the bigger independents are positioned for further success.

And then we have seen over the last two years, particularly with the Secure Act legislation, the real rise of workplace and retirement offerings and larger firms putting a concerted effort towards converting this area of opportunity into advice and wealth management relationships. That is a really interesting growth vector we are seeing.

Hortz: As global Wealth Management practice lead at Accenture, what has your group identified as major trends you believe will most greatly shape the wealth management industry in 2024?

Reddel: There are three key areas that our group has pinpointed and we are anchored in supporting our Wealth Management clients around them.

The first is longevity and the impact of people living longer, living differently, and the way they consume wealth management. The type of advice they need is pretty different and we characterize it as multi-generational advice. We publish an annual research report on this every year. We call it Life Trends and look at this theme as a decade of deconstruction. If you look at the traditional three-stage path of Work, Family, Retirement and how wealth and planning are anchored around that – the established path and thinking around it has really dissolved and changed with new generations. People are planning for different lifestyles. They are valuing finances and well-being differently. We are seeing the emergence of a radically changed set of services people want or need. As an example, there is a greater awareness of the “protection gap” between what people have in terms of life insurance and retirement protections versus how they have planned for that stage of their life. And so, we are seeing this different dynamic translating to actual real innovation and new retirement income products and strategies.

The second one is the rise of generative AI and the age of the “intelligent advisor” which is all about how we incorporate all this new innovation and technology into what and how advisors are doing things. That has been a really interesting one because of the buzz and demand and then applying it to workflows and the business overall. We are actively working with all of our clients to solve for this, not just mechanically or operationally, but in strategy and tactics. This is challenging to figure out as the accelerating pace of innovation for this and other technologies will continue to evolve. So, for many of our clients, much of the impact this coming year of 2024 will be operational. How do you allow advisors to be more efficient, engage with new technology, and reduce some of the risk and control issues that many may have? We see massive promise in terms of enabling true advice capabilities with clients and advisors engaging differently. But for most of our clients, the risks of regulatory action, the risks of security, privacy, and just the risks of fiduciary implications are putting a drag on that progress. So, we call that a major trend, but one that is a little bit less clear on how it will evolve.

The third one is the changing advisor workforce. There is a ton of data out there on the aging of advisors and the need for a new and more diverse workforce. But what we focus on with clients is building upon all of the research we are uncovering on the new job skills and approaches needed by a financial advisor are leading to a substantially different position and this is going to continue to evolve. So, for an “intelligent advisor” in the future, there is going to be much greater demand for coordinating a deeper level of advice through teaming, quarterbacking, and coordinating with a broader set of financial specialists within their organization, as well as a much bigger expectation to use digital and technology in different ways for their clients and build their relationships. Bigger organizations are already starting to push out a lot of new capabilities and tools to these advisors.

Hortz: What are you recommending in general that wealth management firms need to do to meet these challenges and position themselves to thrive in this changing environment?

Reddel: Versus general prescriptions, we focus our specific recommendations on each client as we serve a myriad of different business models and types of financial firms. First off, you have to know exactly and in detail who your clients are and zero in on what they want/need from you. Two, you need to clearly know your strengths and how you can best deliver for these clients. It is bringing those first two points together and aligning all these different transformation priorities against that.

When we see firms fail, it Is not that they do not understand the change that is happening or all these different levers, but they try to do too much or they try to do it in a way that is disconnected from their clients and how they need to serve them. So being laser-focused on your value proposition and aligning this to clients is how we always think about this.

What we always recommend you think about is one, the advisor. We see the human component, even in a digital world, as pretty central to relationships. So, prioritizing investment in digital AI or any other type of transformational levers must be done in a way that meaningfully empowers the advisor. And then two, thinking through how you structure the rest of the firm, the rest of the operating model, in a way that can serve that advisor/client relationship. So that would be how I would answer that question.

Hortz: With your firm’s mission of helping industries and firms change, you must run into industry leaders who have a built-in resistance to change, reinvention, and business model innovation. How do you address this inertia to change and recommend they proceed?

Reddel: That is a great question and a very serious concern. I am always cognizant of clearly discussing that we do not introduce change for change's sake. There is a reason why reinvention is so important. Through our research, we see how financial consumers - their clients - are substantially changing what they want from financial firms.

We work with our client firms to think about there being two types of change pathways. First, we see true reinvention or transformation which requires a C-suite down commitment to becoming a new organization - rethinking front-to-back their business model, who they are, and how they serve clients. We call this Total Enterprise Reinvention which is executed through material incremental change on an ongoing basis to better serve their clients. We always anchor back to what their clients and advisors want from the firm, what are your strengths, and then how to structure your business roadmap around that.

The second form of change we typically see requires a high-level central organizational commitment. Firms that commit to creating a centralized business innovation group that can look across priorities, instill the commitment to this change, and enforce action towards it as critically important for the firm. These commitments to change become a real, durable, transformational initiative; not a three-to-six-month thing, but a three-year-plus undertaking. And so, an organizational commitment and investment are critically required to ensure steady movement to those strategic efforts.

Hortz: Helping firms rethink their business model and processes in many cases must involve having to help change industry mindsets or established patterns of thinking and operating. How do you go about helping clients rethink or adjust their mindset to their business?

Reddel: One of the things I love about our 700,000-employee company, is that we have a ton of global capabilities that we share with our clients. As an example, we have a set of Research and Development Centers. There is one in Ireland that we call the Human Sciences Studio which is a team of cognitive behavioral PhDs that conducts ongoing research. I have personally been there with a couple of different wealth management and retirement clients.

What we take them through is a set of research on their end clients, and just consumers at large, about how they think about their life planning, their finances, and we have zeroed in on a number of cognitive biases that humans have that advice needs to counteract or accommodate for. And when you start to think about those biases from a retirement or financial planning lens, it flips the mindset on: How do we actually serve these clients? What are the things they need to be enabled towards the right outcome? What are the products and services that align with that? And so, we spend a lot of energy thinking about mindset and how we redesign the business model before we start a discussion on technology, AI, or whatever it may be. 


The Institute for Innovation Development is an educational and business development catalyst for growth-oriented financial advisors and financial services firms determined to lead their businesses in an operating environment of accelerating business and cultural change. We operate as a business innovation platform and educational resource with FinTech and financial services firm members to openly share their unique perspectives and activities. The goal is to build awareness and stimulate open thought leadership discussions on new or evolving industry approaches and thinking to facilitate next-generation growth, differentiation, and unique community engagement strategies. The institute was launched with the support and foresight of our founding sponsors — Ultimus Fund Solutions, NASDAQ, FLX Networks, TIFIN, Advisorpedia, Pershing, Fidelity, Voya Financial, and Charter Financial Publishing (publisher of Financial Advisor and Private Wealth magazines).


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