2020 Year End Trend Report

Dawn of The CTO

Trends of Wealth Tech

A monumental year for the world, 2020 also clearly left its mark on wealth management. When we look back on the evolution of technology in wealth management we will almost certainly see 2020 as a turning point for tech adoption and the beginning of its prominence in business strategy.  Factors aligned to significantly accelerate the adoption of technology that allows for a remote workforce, enhances client experience and ushers in the era of information management. One outcome of this shift is that the role of the Chief Technology Officer (CTO) has rocketed to the head of the line in the C-Suite. CTOs are making decisions faster and they are more involved in areas of the business traditionally managed by CHROs and Sales leads.

Prediction: By 2025, a CTO will ascend to the role of CEO within at least one of the largest wealth management firms in the U.S

Over the course of the year, F2 Strategy engaged with more than 65 RIAs, Wealth Managers and Asset Managers representing more than $7 trillion in assets under management (AUM) in order to assess the industry perspective and identify areas of strength and weakness in technology adoption. Our research identified key trends that show what the industry expected to happen in 2020, what happened instead and what it all means for 2021 and beyond.

Trend 1
Pre-Pandemic Expectations are Out the Window

Importance of Digital Transformation

In January, the pace of digital transformation was measured and steady. Data indicated nominal growth over 2019 in the number of firms indicating digital transformation was of high importance.

Trend 2
The Speed of Change Accelerated Almost Overnight

42% of Firms Reported They Had Accelerated Innovation

By April, we had woken up to a new reality and a large percentage of firms reported they had already accelerated innovation and spend on technology.

Trend 3
A More Remote Workforce

Financial Firms Will Request or Allow Some Employees to Permanently Work from Home

Future Outlook: The unanticipated work from home experiment was largely a success with many firms opening the door to permanent changes for at least part of their workforces. Technology solutions will better support employees’ home office lives through data security, internet speeds and other means.

Trend 4
CTO to Become Kingmaker of the New Business Model
Financial Firms’ Biggest Concerns

Future Outlook: The role of the CTO in the C-Suite will continue to rise as they implement essential technology solutions that address client services, employee engagement and operational efficiencies.

Trend 5
Tech Spend Increases to “Keep Up” Rather than “Get Ahead” of Competition in 2021

In 2021, 81% of Firms Expect To Increase Their Tech Budget More Than 5% Over 2020

Future Outlook: Unlike previous years, tech spending is now critical to survival. In the post-pandemic years, firms will spend on tech that improves experiences (reduces friction in advisor/client experiences, integrates platforms and ensures the ability to scale).

Trend 6
Firms See Digital Experience as Cornerstone for Innovation
Financial Services Firms’ Planned Priority Areas Over Next 5 Years

Future Outlook: Over the next five years, firms will use technology enhancements to target a more diverse and global client base.

Trend 7
Almost Every Firm has a CRM but 25% are Looking for Something Better
93% have a CRM. Of those firms…

Future Outlook: Today, no one CRM operates seamlessly within the complex wealth management ecosystem. Moving faster as an organization is predicated on the ability to own your data rather than relying on third parties; therefore the search for the right solution will continue to accelerate as the need to manage information only becomes more critical for survival.

Trend 8
Firms Say “More” Would Increase their Happiness of their CRM’s Effectiveness
Top 5 CRM “Fixes”

Future Outlook: Firms’ struggles to make their CRMs a single pane of glass for their teams will continue to drive industry innovation to solve critical operational issues for advisors.

Trend 9
Conversion Tracking is Lacking

Prospect Conversion Rates

Future Outlook: In 2021, many clients will shift their assets to new advisors. It's a big opportunity for advisors who are prepared and a big risk to those who aren’t. Advisors who proactively track their clients' activities beyond their current relationships will have a better chance of retaining and winning new business.

Trend 10
No Perfect Proposal Generation Tool Exists

65% of Firms Rated the Effectiveness of their Proposal Generation Tools as “Medium” or “Low”

Future Outlook: As firms tire of stitching together a patchwork of proposal generation tools, the tech company that brings a singular solution to market will win the day.

Trend 11
Accelerated Rate of Asset Manager Acquisition of Fintech Firms
Recent Asset Manager/Fintech M&A

Future Outlook: This disruption will continue to grow. It means asset managers have new ways to offer value and advisors have more places than ever to shop for tools that manage volatility and client communication.

Trend 12
Yes! Advisors Willing to Use More Tech Tools from Asset Managers

Top 5 Tech Tools Advisors Would Use if Offered by an Asset Manager

Future Outlook: As the disruption settles into a new normal, asset managers will strategically market tech offerings that address advisors’ pain points of legacy technology.

Trend 13
For AI and Machine Learning Adoption, the Hurdles are High But Not Insurmountable
Top 3 Obstacles Firms Must Overcome to Advance AI, ML and Predictive Analytics

Future Outlook: The next frontier in wealth tech is artificial intelligence and machine learning. Many firms don’t yet know what they don’t know about adoption, but the potential for these tools to enhance firms efficiency and client experience is real and will gain traction in 2021 and beyond.