Cetera Financial Group selects Xtiva for enterprise-wide SPM technology upgrade
Xtiva Reward to support Cetera’s aggressive strategic business objectives including accelerated growth, streamlined operations and increased business scale.
The world of wealth management is barely recognizable today in comparison to just a few years ago – and the pace of change is accelerating. We now live in a highly regulated, technology enabled world with a customer/investor base that’s experiencing a major demographic shift. It’s a perfect storm of disruption.
All these changes are putting substantial pressure on revenues and margins and profitability has taken a beating, putting many firms’ very survival into question.
The advice industry is now under immense pressure to find new ways to make money. It’s no longer sufficient to add some additional products here or change your pricing approach there or allocate more capital to recruiting front line staff. These kinds of business tweaks have had little impact on margin expansion.
Whether or not you agree with the number 40, it’s hard to deny the pressures that are moving us in that direction. There are pricing pressures on many of the services advisors provide their customers today. Technology has commoditized many of these services and this trend is increasing. In a technology-enabled wealth management industry, the value of your service as an advisor does not lie in access to and management of investments. Long gone are the days that investors needed a highly compensated advisor to call in an order to a trading floor. Decently-designed portfolios of low-cost investments are merely a click away. The alpha of advisors is increasingly not associated to investment portfolio management. All of this is a scary proposition for many advisors and wealth management firms today.
The question all firms should be asking themselves now is this: How will we adapt to a business environment in which investment advice is priced at (or moving in the direction of) 40 basis points?
As I see it, there are really three options for advisory firms:
1. Cut costs massively;
2. Scale your business significantly;
3. Reinvent your business model.
With respect to the first two of these options, they are well underway. Firms have been cutting costs continuously for much of the past two decades and cost management continues to be a focus. And consolidation to achieve scale is already occurring.
The real opportunity facing many financial services businesses, and in particular the wealth management industry, is the reinvention of the entire business model of delivering advice.
So, how do you reinvent your wealth management business model and ensure you won’t become a casualty of this new reality? How do you create stickier clients, boost growth, and earn a premium by delivering increased value? And how can you do that amidst these five massive shifts underway in wealth management?
Despite the multitude of challenges facing our industry, the opportunities are abundant:
The challenge for advisory firms face is the need to create more value for their investor clients. But how?
The future for many wealth management firms depends on formulating and executing a multi-pronged strategy that re-envisions financial advice business model and leverages digital technology throughout the enterprise.
Here are a few ways financial services firms can do this:
Advisors can also do many things to help themselves in the future of wealth management. Read more about this in our article 10 Ways advisors can prosper in the new wealth management.