Page 12 - Investment Advisor February/March 2023

INDUSTRY INSIGHTS

By Timothy D. Welsh

5 Trends Shaping Wealth Management Today

These industry developments could have a big impact on your firm starting this year.

ach year, industry players sit down Because they control a huge chunk of
and read the tea leaves to spot the assets-under-management revenues and
Esubtle yet dramatic changes hap- advisors on the big IBDs’ platforms, these
pening in the independent wealth space OSJs have leverage. They can threaten to
and to identify the key underlying themes break away and go completely indepen-
that will shape the industry going forward. dent as an RIA unless concessions are
Consider these under-the-radar made and costs are lowered, creating a
developments that will likely have a big vicious, painful cycle for IBDs. And in fact,
impact on your strategic planning for we have recently seen several of those
the coming year and afterward. large, industry-defining breakaways occur
as relations deteriorated and staggering
1. Asset managers fire back with their It is so named because it is powered amounts of AUM and advisors were lost.
own technology platforms. by the GPT-3 language model, which is a Just as Coca-Cola bottlers and
For the past several decades, we’ve seen compelling natural language processing Budweiser distributors have shown, dis-
the unrelenting march of technology (NLP) approach that can generate human- tribution has become more powerful
innovation taking basis points out of the like text from a few words of input. than manufacturing, and this battle is
investment management value chain, Early results of ChatGPT apps are now playing out in real time in the IBD
most notably in the lucrative areas of turning heads, and it’s only a matter space. As a result, enterprise-level asset
distribution. As a result, asset managers of time before technology innovators managers and technology providers are
have been relegated to the back seat in unleash ChatGPT into financial plan- now targeting individual OSJs for their
the financial advisor ecosystem, as their ning and investment management pro- future growth, rather than attempting
technology overlords dictate the terms cesses to drive scale and engagement and to work with the home office, which
of industry change. fundamentally transform how financial further increases the negotiating powers
To stem this tide, expect to see an services will be developed and delivered. of large OSJs.
increasing number of technology weap-
ons originating from asset managers as 3. OSJs become even more powerful. 4. Marketing automation remains reliant
they look to better control and cement For years, the largest independent on advisors’ personal selling skills.
their leadership back into the minds of broker-dealers have depended on the Despite the rampant usage of marketing
advisors by deploying elegant, goals-based mega-branches office of supervisory automation tools to drive organic growth
financial planning, asset allocation and jurisdiction (OSJs) to provide local lev- in the advisory world, results have been
portfolio construction tools of their own. els of compliance, technology, market- lukewarm at best. Just about every
ing and practice management support benchmarking study has shown that the
2. Artificial intelligence finally arrives in to their advisors. By delegating this ser- independent advisor industry’s organic
wealth management. vice and support, the home offices of growth rates — once market gains are
Following the launch of ChatGPT last the large independent broker-dealers subtracted out — have been hovering
month, more than 1 million users signed up are able to leverage themselves, control around zero, which is a cause for alarm
just in the first week to take this remark- costs and better achieve scale. as clients age and increase their distribu-
able piece of technology for a test drive. However, by doing so, they have now tions despite persisting market volatility.
According to Forbes, ChatGPT is given the power of distribution to a Marketing automation platforms are
an open-source, end-to-end dialogue handful of massive and growing local- terrific at providing scale and reach for
system designed to enable anyone to ized networks, some with upwards of advisors. However, the ultimate link in
quickly build and deploy conversational 1,000 advisors. Thus, some IBDs are rap- this chain is the last mile of the prospect
AI agents for chatbots, virtual assistants, idly losing control, as these big OSJs start journey — being matched and engaging Adobe Stock
and other interactive applications. dictating terms back to the mothership. one-on-one with their potential future

10 INVESTMENT ADVISOR FEBRUARY/MARCH 2023 | ThinkAdvisor.com