2023 WealthTech Outlook Report

Wealth Management Makes Strong Commitment to Tech

In past years, after months of recession worries grabbing every headline, we’d have seen wealth management firms make significant pullbacks on technology spending. But 2022 defied tradition, and so far, there hasn’t been a major slowdown in technology spending. In fact, some firms like LPL and Fidelity announced huge technology investments for 2023. The wealth management industry is sending a signal it’s committed to its technology—no matter what.
Why the change in mindset?
Client experiences have become firms’ major differentiator in a competitive marketplace. Technology drives those experiences, from sleek user interfaces to behind-the-scenes data and reporting capabilities that allow advisors to tell a better story. Firms with advanced technology are winning disproportionally.
Also, technology is disrupting the industry as a whole. Take direct indexing, for example. Portfolio customization—traditionally reserved for the UHNW—is underway across a much wider spectrum of investors. As the ability for investors to take ownership in companies and brands they love through fractional shares grows, F2 Strategy predicts there will be an opportunity for companies to tie brand affinity to company ownership in a way that has never been done before.
In 2022, F2 Research engaged with 80 RIAs, Wealth Managers, and Asset Managers representing more than $20 trillion in assets under management (AUM) to explore trends in four major areas of wealth management that technology is impacting: CRM, prospecting, alternative investments, and direct indexing. It also examined talent needs and 2023 planned expenditures. By reexamining the strategies and investments the industry made in 2022, we can forecast the changes ahead in 2023 and beyond. Here are nine trends we saw in 2022 and where we see them going in the next year.

Trend 1

Firms’ Satisfaction with CRMs Drops 20 Points Since 2020

Future Outlook: In early 2022, firms expressed their collective dissatisfaction with their CRMs, generating an abysmal net promoter score of -46. There is hope that things will improve in 2023, but it hinges on firms subscribing to the idea that the CRM is the central hub of all levels of the organization. As more firms clearly define their CRM goals; avoid “shiny object syndrome” by carefully researching CRM options before buying to find the right fit for their goals; and actively engage with the tool, their overall satisfaction will increase. 

Trend 2

Firms Prioritize CRM as Operational Tool, Not Sales Tool

Future Outlook: While 86% of firms surveyed capture new business opportunities and prospect data in their CRM, 69% don’t have the analytics and reporting that helps advisors benchmark new business development against specific actions and behaviors. This is a clear area for growth in 2023. Firms need to institutionalize analytical processes around business and prospecting in order to see their CRM help them grow.

Pie chart showing % of firms capture new business and prospect data
Trend 3

Without Tracking the Prospect to Client Process, Firms Unaware of Lost Revenue

Future Outlook: Most firms onboard less efficiently than they should. By measuring non-client conversion ratio, client process abandonment ratios, and client transfer viscosity ratios firms can find lost revenue opportunities and slow asset leaks. Establishing a process for measurement should be job one in 2023 because doing so will actually uncover hidden money.

Firms measurement of prospect attrition ratios
Trend 4

78% of Firms Plan to Increase Their Tech Resources in the Next 2 Years

Future Outlook: The arms race for wealth tech talent is seriously underway. While the rate of attrition we saw in early 2022 may slow, smart firms will use competitive compensation packages, flexible work options and meaningful project work to attract and keep talent. In fact, 2023 may offer wealth management firms a scenario that wasn’t feasible a year ago—the opportunity to get better talent at the expense of large technology firms that are letting it go.

Tech resources past 2 years vs. coming 2 years
Trend 5

Nearly Half of Firms Actively Involved in Alternative Investments Expect Slower Growth of the Asset Class

Future Outlook: Alternative investments may have reached their natural levels within portfolios and as a result firms don’t anticipate reducing AUM, but do anticipate slower AUM growth in this asset class than in previous years.

Top 5 alternative investment opportunities offered
Trend 6

Third Party Tools for Alternative Investments Management Offer Benefits, but Can’t Eliminate Manual Requirements

Future Outlook: Data will remain the biggest challenge for firms. Until guidelines and standardization in reporting for alternative investments are universally adopted by the industry, the data issues which require manual intervention will persist. Advisors who allocate funds to alternative investments should push fund managers and administrators to adopt standardization and solve the reporting issue at the source.

Benefits of third party tools
Trend 7

Direct Indexing is Growing—42% of Mid-Sized Firms Currently Offer It and More Than Half of Those Who Don’t, Are Interested

Future Outlook: Tax optimization will continue to be the number one use case for direct indexing. In addition, the ability to engage in portfolio customization on a larger scale puts the industry on the precipice of combining brand affinity with company ownership over the next several years.

Firms offering direct indexing strategies
Trend 8

Digital Client and Advisor Experience Top List of Priorities in 2023

Future Outlook: Client experience is significantly weighted to technology. Therefore, technology spending will not see the decreases it has seen during past moments of economic uncertainty or downturn. As firms implement integrated mobile-friendly client experiences, real time data values, transparency of investment information, personalization and self service, document sharing, and texting they should implement data point tracking to measure the success of these new capabilities.

Trend 9

Data Architecture Increasing in Importance as its ROI Becomes Evident to Firms

Future Outlook: Better client insights require better data and 2022 was the year wealth management firms decided to focus their efforts on data architecture in order to build great experiences on the back of their investment in data. This effort will continue to play out in 2023 and defined strategies will help them get the most out of their data architecture.