I’ve Seen the Future… Well the FutureProof Festival, Anyway

I’m just back from attending the Future Proof Festival – along with thousands of financial advisors, wealth and asset managers, investors, fintechs, emerging startups and the media – all of us looking for insights into what lies ahead for the wealth management industry.

We heard a lot about where wealth management is going – and what it will take for firms to get there. Several DLPR clients were there to help “uncloud the crystal ball” by speaking on panels or giving media interviews, including Neuberger Berman, Brighton Jones, Bitwise, and Aspiriant.

One of the most riveting topics was the progress – or lack of it – of the great generational wealth transfer. Attendees observed that older generations seem reluctant to have open and frank financial discussions with their children. Many noted that these tough conversations mainly take place only during major life events (an adult child getting married, a parent’s illness, etc.). There will be massive amounts of wealth changing hands in the next decade – and a massive amount of wealth will change advisors as a result. But, the transfer will be far from smooth.

What’s also clear is that the industry is being transformed by powerful forces:

• Artificial intelligence was a major point of interest. Attendees want to know how AI can help their businesses, but the consensus was that the technology isn’t there yet in terms of practical applications. Wealth managers say they’ll need to see a meaningful ROI before investing the financial and human resources to adopt AI.
• Technology, in general, is a catalyst for change. A lot of new fintechs were on the scene, demonstrating ways to help advisors sort data, automate marketing processes, improve reporting, etc.
• Alternative assets were another hot topic. RIAs increasingly recognize how important exposure to private markets will be for their clients to generate returns in the next decade, but many HNW investors (and advisors) are concerned about fees, lock-up periods, how the strategies work, etc. A huge amount of education around alts is needed for RIAs and HNWs in order for investing in alts to become a more approachable area of the market.
• It’s still early days for crypto as an accepted asset class. As our client Matt Hougan, CIO of Bitwise, put it, “Institutions own 73% of all US equities, but only 5% of all crypto assets. So if you are questioning whether you are late to the party, the answer is no.”
• Industry consolidation is continuing, with a new wrinkle: older players are increasingly being acquired by newer, higher tech platforms. Some of the more established advisors at FutureProof expressed discomfort with this trend, as they still prefer and crave human interaction.
• The impact of private equity on the industry is still uncertain. The phenomenon is so new that the PE firms’ exit strategies aren’t very clear. Very few advisory firms are publicly held, so cashing out via an IPO isn’t an option for most. A PE firm could sell its wealth management unit to a big bank, but some attendees felt that would run counter to the RIA industry’s mission of acting as a fiduciary and providing independent advice.

When you put all of the FutureProof themes together – demographic shifts in wealth, disruptive technology, the need to master new asset classes, and structural/ownership changes among firms – the common denominator is the need for effective engagement. While many attendees cited a concern about the proliferation of content bombarding advisors and their clients, the industry is sorely in need of education on topics like allocating to private markets, how to communicate with the next generation of investors, and what consolidation and PE means for the industry moving forward.

By being a resource and educator on topics that seem inaccessible or unclear, we can empower our clients’ voices to be heard in a meaningful way by both the media and the industry more broadly.

By Stephanie Dressler, Executive Vice President—DLPR