Investment Horizon
This article is originally taken from FNZ.COM.
A major global analysis by ThoughtLab, Deloitte, and FNZ, supported by AWS and Genesys, reveals that by 2028, the investment industry will be transformed by digital innovation and AI. The study, incorporating views from 250 wealth management firms and 2,000 investors, shows:
– 55% of executives believe born-digital firms will revolutionize the wealth industry, and 52% of digitally leading firms foresee a significant shakeout.
– 69% of executives expect AI to fundamentally alter their operations, while 47% think blockchain will reduce the need for intermediaries.
– 52% of executives anticipate commoditization of most products, pushing providers to offer value-added services, and 39% predict blurred lines between wealth management, banking, and insurance.
The study underscores the urgency of digital transformation as Generation X takes the lead, and Generations Y and Z become more influential:
– 68% of investors—and higher percentages of Gen Y/Z and Gen X—desire digital experiences similar to born-digital companies.
– 60% of investors seek better digital tools for direct investment management.
– 51% would invest through big brand retailers or tech companies if possible.
In response, 90% of investment providers are advancing in implementing modern, cloud-based platforms to digitize operations, cut costs, innovate, and create new revenue streams.
These insights are from “Building a Future-Ready Investment Firm,” based on surveys conducted in late 2023 and enriched by expert advisory panels and interviews with senior industry practitioners. To thrive, industry executives must understand future investor expectations and how to meet them, says Louis Celi, CEO of ThoughtLab and study director.
Five key takeaways
The research uncovered five important steps that wealth management firms are taking to become future ready:
Digitally transform client advice and experience. Technological advances are forcing changes to advisor roles and client experiences. Over the next three years, 60% of advisors expect to use AI tools and 67% will rely on hybrid, tech-driven approaches. Firms are behind in meeting investor preferences for engagement through mobile devices and video conferences.
Make client diversity a business opportunity. Firms are going up-market, down-market, and across global markets—and deeper into client niches—to find growth. They are using data to understand their clients as individuals, not investor segments, and to personalize solutions. They are also diversifying their advisor base to serve a more heterogenous clientele.
Drive performance through AI and digital innovation. Investment firms have made significant progress in various aspects of digital innovation, with 9 in 10 in mid-implementation or advanced in technology and process transformation—leveraging increased use of AI, data, and advanced technologies such as end-to-end platforms to shape their future strategies. The returns on their digital investments are remarkable: 44% report lower costs, 41% higher shareholder value, and 40% increased revenue.
Rethink offerings for the next investing era. Over the next three years, investors will want higher-value products and services—from alternatives (62%), annuities (50%), environmental, social, and government (ESG) investments (39%), and custom index funds (25%) to discretionary investment (60%), tax planning (44%), and private banking (41%). To deliver, firms will use digital solutions to drive down the cost to serve.
Adapt business models and market positioning. A new playing field will emerge as digital entrants trigger market shifts and firms reinvent themselves and consolidate. Investor churn will add to the disruption: 56% of investors say they are considering changing providers over the next three years, with fees being the top reason. To respond, firms are lowering or capping fees, while others are building value by adding holistic and specialized planning services.
