2008 Wealth Management Trends

Will 2008 be another mega-growth year?

You said, “Yes.”  In fact, 61.7% of you said that you expect your wealth management firm will achieve double-digit revenue growth in 2008.  However, most of you also agreed that you face even more challenges in 2008 than in previous years servicing high net worth investors and achieving profitable wealth management growth.

We’re not surprised.  In fact, to better understand these challenges, we felt it was time to launch a new survey on wealth management trends in 2008 based on feedback from all wealth management segments and the asset management firms that supply them with new products.  Most wealth management surveys to date have solicited input from only the traditional players such as private banks, trusts, multi-family offices and broker-dealers. 

We mailed the online survey to our over 5,000-member wealth management community so that we could receive feedback from the diverse population who now compete for high net worth (HNW) investors, those who have over $1 million in investable assets, excluding their homes.  Our community consists of not just the traditional players, but also new entrants in the wealth management field like insurance companies, hedge funds, and registered independent advisors.   

The reception was positive.  We had 161 respondents, representing eight different types of wealth management organizations, making this one of the largest and most comprehensive North American wealth management surveys ever.  Due to the strong interest, we plan to conduct the survey annually.

Let’s unveil the results of the NorthStar 2008 Wealth Management Trends Survey.

Wealth Management Industry Trends

Despite recent market volatility, 51% of respondents believe their HNW clients' primary investment mandate is to "continue to grow their wealth" versus sustaining or preserving their wealth.  But respondents agreed that clients want their advisors to grow their wealth "in a more risk adverse manner than in 2007."

Current market volatility may also drive affluents to specialists in greater numbers.  Respondents think that HNW investors will be more likely to seek advice in 2008 from wealth managers versus traditional advisors or investment generalists.  Respondents distinguished wealth managers as more independent in terms of product offerings, more holistic in their approach to advice, including the ability to provide tax and estate planning, more proactive and relationship-oriented, and more knowledgeable as compared to traditional advisors.

In light of market volatility and dynamics, we asked about the major challenges facing wealth managers and the factors that would help them overcome those challenges.

Respondents say their firms’ greatest wealth management challenges for 2008 is business growth, especially acquiring clients and assets.  Second is attracting and retaining staff.  Retaining clients and servicing increasingly demanding clients both rank third.  Next are lack of differentiation and difficulty scaling the business.

To overcome these challenges, wealth managers agree that process improvement, client acquisition, and client reporting will best help them scale their businesses in 2008, even more than hiring and training.  Respondents also identified spending less time an administrative tasks as a way to scale their business in 2008.

Wealth Management Firm Trends

Despite the financial industry's volatility, 65% of wealth managers think their firms are keeping up well or very well with industry changes.  This confidence is also reflected in respondents’ revenue forecasts for 2008 where 61.7% of respondents forecast double-digit revenue growth.  However, this 2008 forecast is slightly lower than in 2006 when 74% of wealth managers polled in the SEI Private Banking 2007 Q1 Executive War for Talent Quick Poll stated they had actually achieved double-digit revenue growth.

 
61.7% of respondents forecast double-digit revenue growth in 2008.

• Differentiate their firms based on better service, brand and reputation, and more and better offerings.
  
  
• Retain clients by providing proactive advice and adequate investment performance.
  
  
• Attract and retain top wealth managers through compensation and platform solutions.  Both are rated higher than culture and brand/reputation. 

Wealth Management IT Trends

Although wealth management firms seem to have well conceived strategies for growing their businesses in 2008, most respondents claimed they had inadequate software tools to support those business strategies.

Specifically, 75% of respondents think that wealth managers are very frustrated or somewhat frustrated with their current software tools.  In addition, 88.3% of wealth management executives agree or strongly agree that "a strong wealth management platform is critical to growth," up from 82% polled in the 2007 SEI survey.

The majority of respondents agree that wealth managers should focus their technology investments in 2008 on the front office.  50% of wealth managers think the primary technology investment should be in an integrated, front office wealth management/advisor desktop. Respondents say they favor an "all-in-one system" that covers the "beginning to end process and tracks clients from the prospect to portfolio monitoring phase." They also want the advisor desktop fully integrated to their existing CRM system.

                                2008 Recommended IT Investments

To view complete survey results, go to www.northstar.com starting on February 4, 2008.