The global market for wealth advice is poised for transformation and the appetite for wealth services is set to expand through the 2020s, according to a paper from EY Financial Services.
The firm's latest report, which examines the future models of wealth and private banking, said the new paradigms for advice will redefine client experiences while reducing cost to serve.
According to the research, client expectations were expected to grow by more than 40% between 2020 and 2025. Demand for sophisticated products and services among affluent and high net worth clients was also expected to grow.
The report suggested 75% of clients seeking financial education and training from their advisers are among the keenest digital adopters, making client needs more complex and the call for firms to optimise client engagement more important.
It also suggested adviser-led channels will soon account for less than 50% of client interactions, providing an opportunity for WPB firms to harness digital technologies, improve efficiency and at the same time scale-up automated, client-led advice.
According to the EY's research, the future of advice will be defined by forward-looking, data-powered, automated insights and individualised experiences tailored to the specific needs of the client.
Holistic advice across a broad spectrum of traditional and new wealth products, as well as high levels of transparency and trust, underpinned by an overt duty of care will also play an important role, it found.
The 2020s will see current industry practice accelerate toward this future model, driven by four key strategic themes: the disruption of current client expectations, the democratiszation of advice across the wealth spectrum, integration of people and digital technology and the use of data and technology in advice generation.
EYadded: "These changes will have far-reaching implications for the structure of the wealth industry. Established firms, facing the prospect of increasing competition from nimble new entrants, are already working to upgrade their capabilities. However, it's too early to know exactly how wealth models will evolve in different markets.
"Incumbents also face a range of obstacles, including legacy technology, ingrained cultural habits and the challenge of cross-border execution."
Overcoming historic industry barriers
EYsaid advisers need to develop a vision for the future of advice that excites clients and employees while creating value for all stakeholders.
"They must also identify the role they want to play in delivering this new paradigm within the context of an increasingly rich industry ecosystem," the accountancy and consultancy firm added. "Firms should then design their desired target model and set out a route map for investment and transformation that will allow them to achieve that model."
Technology will clearly be a critical area of focus, it continued, but must always serve strategy and should be integrated with human talent in a seamless, synergetic way.
"Bold vision, new structures and strategies, and the right culture and mindset will be equally important to success. As they move toward their future state, wealth and private banks will need to strike a sensitive balance between innovation and caution, continuity and change, local and international factors, and customer experiences and cost."
Other recurring challenges will include the need to build clear links between data, trust, value and fees, the importance of flexibility and collaboration, and the need to overcome historic industry barriers, EY said.
"The future of advice will be very different than the past. Now is the time for the industry's leading firms to start moving toward radically different future models, if they are to remain relevant in the future."