Study Highlights how End-To-End Platforms,
Holistic Advice, AI, and the Rising Demand for Personalized
Investments and Technology are Accelerating the Future of Financial
Advice
BERWYN,
Pa., Dec. 18, 2023 /PRNewswire/ -- With 2023
coming to a close, Envestnet, Inc. (NYSE: ENV), a leading provider
of integrated technology, intelligent data and wealth solutions,
announces significant trends shaping the future of financial
advice. Drawn from research published by Envestnet's Market
Intelligence Team, including an analysis of market data,
third-party research, as well as an Envestnet survey fielded
earlier this year, the comprehensive report highlights the evolving
landscape of financial advisory services and the increasing role of
technology in the sector – suggesting key themes and trends that
will power advisor growth and shape the financial advice industry
in 2024 and beyond.
"We sit at a unique vantage point for the 107,000 advisors who
utilize our platform – clients that comprise every conceivable
business model – each offering unique insights that drive
innovation and enhancements to the Envestnet ecosystem," said
Rich Aneser, Chief Strategy
Officer for Envestnet. "We use the insights and enhancements to
help wealth managers and our partners grow their business and
deliver powerful, connected advice for their clients."
"The wealth management market has long faced challenges with
fragmented technology and inefficient workflows," said
Chris Shutler, Head of Strategic
Development and Market Intelligence for Envestnet. "Our
research highlights key trends such as industry and tech stack
consolidation and convergence, the shift towards more complete
financial life management, the growth opportunity for advisors
offering retirement plans, and leveraging data and AI to provide
personalized services. To not only improve service delivery but
also stay competitive, it's crucial for firms and advisors to keep
pace with these developments, addressing challenges through a
holistic, integrated platform."
According to the report, the future of financial advice is being
reshaped by trends including the following:
End-to-End Technology and True Integration for
Advisors
The report highlights a significant demand among
advisors for end-to-end technology platforms and improved
integrations – important to consider given the availability of more
than 400 wealthtech solutions in the market (Kitces AdvisorTech).
This need extends beyond single sign-on capabilities to deep
connectivity between systems and software providers. Further, even
among their existing tech solutions, firms are looking to improve
adoption and utilization rates to take full advantage of their
investments. Some of the top areas noted in the survey as critical
to the advisor experience included the integration of client
engagement tools and improvement of custody workflows.
"Increasingly, we've seen more of our clients looking to
consolidate and streamline the technology and solutions their
advisors utilize, to provide a more unified experience for
customers and make it easier for them to do business," added
Shutler.
As an example, First Command Financial Services recently
announced its partnership with Envestnet to provide its network of
financial advisors access to the entirety Envestnet's integrated
and unified financial ecosystem.
First Command's National Director of Advisor Operations
John Osarczuk shared that
"leveraging the Envestnet ecosystem provides our advisors with the
technology and solutions they need to better serve clients through
all stages of their financial lives – doing so efficiently and at
scale."
Evolution Towards Holistic Advice
From an investment
perspective, advisors have the potential to add 300+ basis points
in annual value for clients, particularly through tax-efficiency
and behavioral coaching. The report points out that amid this
ongoing evolution towards more holistic advice, the scope of advice
is expanding, and advisors increasingly need to add value beyond
investments for their clients—such as through estate planning, tax
advice, loan and credit management, life insurance, and health
planning.
Envestnet | MoneyGuide has been ahead of this trend, providing
tools to enhance capabilities for advisors whose practices
incorporate financial planning. Its innovative and industry leading
Goals-Based Planning digital experience can align investment
strategies with specific goals and suggest ways to streamline their
implementation. Its MyBlocks offering can help deconstruct the
planning process into bite-sized modules that help clients best
allocate their income and maximize every paycheck.
In addition, MoneyGuide Wealth Studios offers capabilities
including an interactive demo of advanced estate planning
strategies. It can help advisors address client cash flow questions
prior to retirement, and model dynamic net worth over time.
Retirement as a Growing Opportunity for Advisors
The retirement market presents an underappreciated growth
opportunity for advisors. Challenges in accessing workplace
retirement plans for many SMBs, combined with regulatory tailwinds
such as SECURE Act 2.0, and technology innovations are making it
easier for non-retirement-expert advisors to offer retirement
solutions. What's more, employers are increasingly looking to
integrate financial wellness tools into their benefits packages as
a competitive differentiator, yielding higher employee
satisfaction, productivity, and employee retention rates. Looking
ahead, Envestnet expects the workplace to prove to be a significant
path for advisors to attract new assets.
"Retirement investors who are better informed about their
complete financial picture are in a strong position to make better
decisions," said Joe Smolen,
Senior Vice President of Core and Institutional Markets at
Empower, a leading retirement plan service provider. Empower
and Envestnet recently partnered to launch an experience allowing
plan sponsors to optimize retirement saving and planning for
participants. Envestnet Retire Complete allows advisors to help
businesses deliver value to their employees, while mitigating
fiduciary concerns and service challenges associated with running a
retirement plan.
Mr. Smolen added: "Together we have designed a state-of-the-art
experience that allows plan sponsors to optimize retirement saving
and planning for participants, while maintaining the flexibility to
design features that work best for their organizations."
Leveraging Data and AI for Personalized Service
The
research indicates a growing client demand for personalized
services, achievable through data aggregation and next-best-action
insights. According to the survey, a majority of advisors (60%) see
the potential for these types of insights to improve their business
or advice to clients but have yet to implement them. Of those firms
who are leveraging AI-powered next-best-action insights, many are
seeing not just enhanced efficiency but improved client
interactions and service delivery such as when insights are
integrated with their CRMs and advisors are supported with alerts
for advice opportunities across any range of wealth, lending, or
banking areas.
The machine learning models that power Envestnet's Insights
Engine, a solution within Envestnet Wealth Analytics, offers more
than 100 different types of data-driven insights for advisors,
curated daily. This technology learns patterns from data and
highlights certain sets of patterns to human experts who then
decide how to act on these highlights. This can include
establishing patterns in behaviors, account activity, and cash
flows-- the Insights Engine calls out important deviations and
opportunities for advisors to address with their clients. The team
also regularly improves model performance from human feedback.
The importance of the trend is reinforced by Craig Iskowitz of Ezra Group, who
shared his thoughts for the report on one way the industry will
look entirely different five years from now: "AI-powered next best
actions will disrupt the standard advisor workflow. These systems
will drive efficiency, productivity and sales results to unheard of
levels."
The Growth of Managed Accounts as a Preferred Choice
The advice industry is witnessing a migration from
commission-based to fee-based accounts. Based on the report's
analysis, managed account assets have seen double-digit growth
across all distribution channels.1 Use of data,
technology and the insights generated can help advisors determine
and demonstrate that a managed account, and specifically
a UMA, may be in a client's best interest. Within this
segment, Envestnet expects UMAs to remain the fastest growth area
of managed accounts as they allow multiple investment vehicles to
be combined into a single account for a unified view and customized
client solutions.
Envestnet's survey and analysis bring into focus the dynamic
changes in the financial advisory sector, emphasizing the growing
interconnection between technology, personalized service and
comprehensive financial planning.
Financial advisors interested in learning more about these
trends and insights are encouraged to contact Envestnet Market
Intelligence for more information about the report.
ABOUT ENVESTNET
Envestnet is transforming the way financial advice is delivered
through an ecosystem of technology, solutions, and intelligence. By
establishing the connections between people's daily financial
decisions and long-term financial goals, Envestnet empowers them to
make better sense of their finances and live an Intelligent
Financial Life™. With more than $5.4
trillion in platform assets—more than 107,000 advisors, 16
of the 20 largest U.S. banks, 48 of the 50 largest wealth
management and brokerage firms, more than 500 of the largest RIAs,
and thousands of companies, depend on Envestnet technology and
services to help drive better outcomes for their businesses and for
their clients.
Envestnet refers to the family of operating subsidiaries of the
public holding company, Envestnet, Inc. (NYSE: ENV). For more
information, please visit www.envestnet.com, and follow us on
LinkedIn and X (@ENVintel).
Retirement plan sponsors will always retain some fiduciary
responsibility and should therefore conduct their own initial and
ongoing research and due diligence on third party service
providers, including but not limited to trustees, investment
managers, recordkeepers and third-party administrators.
Potential transactions identified by the Insights Engine or
Non-Managed Insights tool are based on concentrated positions,
concentrated asset classes, and/or high cash allocations but do not
include a fee analysis or other factors that should be taken into
account when considering brokerage versus advisory accounts.
Potential transactions identified by the Insights Engine are for
informational purposes only and are not to be construed as an
instruction to take any specific action. Envestnet, Inc. and
its subsidiaries and affiliates are not responsible for any
decisions or recommendations you may provide to your clients.
1 Cerulli Lodestar and Envestnet calculation,
2023
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SOURCE Envestnet