2014 Wealth Management and Retirement Outlook

While in the wealth management industry, the outlook for 2014 may seem to be much of the same of what we saw in 2013, there are actually some exciting advancements on the horizon. People are becoming more aware of the need to save and spend in the right ways. Financial firms are honing in on their strongest core competencies and finding new ways to capitalize on them. There is a wealth of opportunity (pun intended) to serve clients at every asset level and the market potential is still growing.

Uniform Fiduciary Standard Still Under Debate

Ever since Dodd-Frank tasked the Securities and Exchange Commission (SEC) to study the need for a uniform, fiduciary standard of conduct, the SEC, Department of Labor (DOL), and financial firms and associations have been debating its definition and how broadly the standard should apply. The SEC version will impact both brokers and independent advisors. The DOL version, defining fiduciary under the Employee Retirement Income Security Act (ERISA) and Internal Revenue Service (IRS) will affect brokers and service providers of pensions, 401(k) plans, and IRAs under certain circumstances. The DOL is expected to propose a new, fiduciary definition in summer 2014. Mary Jo White, Chairman of the SEC, addressed the SIFMA Annual Conference in November 2013 and reiterated that her team is actively working on a standard definition proposal, while also working with the DOL to find consistency where needed.  For the last several years, we have expected a finalized standard, so it will be interesting to see if 2014 brings closure. The next question will be how quickly wealth management and retirement firms will need to integrate and implement on the changes.

Now, on to more fun topics…

Client Experience Front and Center

There has been a marked shift to focus more on client experience in the products, services, communications, and investments over the past couple of years. Once many of the mergers and acquisitions ended their integration programs, leaders were able to take time to strategize on how to bring all of the newly combined capabilities to their clients. The new trend is to give the client what they want, when they want it, and how they want it. It may sound easy to focus on client experience, but it can be one of the most difficult goals to achieve given the complexities of internal systems and technology, multiple brands under one roof, cultural biases from different lines of businesses, and the inability to consolidate a single-version-of-the-truth with client data. How does an organization capitalize on the power of bank-brokerage integration?

On the flip side to giving the client what they want, firms must also focus on operational efficiency.  Sure, a client may want face-to-face meetings with a personal advisor, but may not have enough assets to justify the higher level of service. How can firms provide exceptional customer service, profitably?  The continued emergence of digital and multichannel capabilities will help firms drive down the cost to serve in some areas, but the middle and back offices also need streamlining.

Bringing Sexy Back

We all know that much of the materials and experiences in wealth management and retirement feel (and sometimes are) outdated. However, we are seeing firms focus on simplifying the complex for clients and bringing ideas and solutions in a more interactive and engaging way. Think of iPad apps where you can interact with different scenarios for retirement. Picture the ability to host all of a client’s information in a secure online area that is shared by the client, advisor, and firm. Collaboration and real-time engagement are trending in our industry, and it is about time. Clients expect an experience and excitement like they get on Amazon or Zappos, or with Wii. The industry is investing in data visualization, digital solutions, social media capabilities, and much more.

What this means in 2014 is that while much of the hard work of data integration/cleansing, technology simplification, platform evolution, and product development will take place in the middle and back offices, the front office will be delighting customers with a slick new look and feel. So, while a client’s retirement goal may still feel daunting, the cool, new apps and gamification techniques make adding $100 more per month into their IRA feel as good as advancing a strength level on Wii Fit.

Bullish on 2014

As I look at the trends in the wealth management and retirement industry, I am quite bullish. I cannot predict if the markets will go up or down or where interest rates may go, but I can predict that financial firms are continuing to become more client centric, more operationally efficient, and more engaging for customers. And that is a portfolio I would buy any day.

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