Rising Wealth, the Decline of Employer Pensions Plans, Digitization and Automation Are Drivers Of Industry Growth And Disruption
Zoe Financial, a technology-driven marketplace that empowers consumers to make better financial decisions, released a new report that found current growth estimates of the US wealth management market undervalue the financial advisory services potential. Zoe predicts that the market will reach $200billion by 2030 from today’s $57 billion.
The Digitization of Wealth Management explains how a variety of factors are coming together to drive major industry change that will provide both risk and opportunities for advisors.
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“Digitization and automation are transforming every industry, and there’s a huge opportunity for financial advisors who will adapt to this new paradigm,” said Andres Garcia-Amaya, CFA, Founder and CEO of Zoe Financial. “The decline of employer pensions and a looming retirement cliff have left the wealthiest generation ever unprepared to financially manage the next phase of their lives. Financial advisors who offer a personalized, frictionless, digital wealth management experience will fill the gap.”
A McKinsey & Company study found that U.S wealth management assets are at an all-time high of $42 trillion. A recent IBISWorld industry market report expects current total financial planning revenue to reach $57 billion this year and $80 billion by 2024. Zoe’s research suggests a much faster revenue upswing due to broader access to new clients, which led the company to forecast $200billion in industry revenue by 2030. Baby Boomers, a now digital-savvy generation that holds more wealth than any demographic cohort in history, are looking for a wealth management experience suited to the unique circumstances of their retirement and their expectations of hassle-free service.
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The Digitization of Wealth Management also explores how the financial industry is changing as automation streamlines workflows. Zoe predicts that innovation and competition will cut fees for advisory services by a third. Financial advisory practices that digitize the value chain by updating their tech stack and automating processes will likely prevent margin erosion.
“The bottom line is that the financial advisor, who used to be part of distribution (a financial products salesperson), is now becoming the product,” Garcia-Amaya noted. “To succeed in the digital transformation and serve a generation that has different expectations than the generations that preceded it, the wealth management industry must streamline and digitalize. Advisors will need to personalize services and make their value proposition more transparent.”
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