Thriving on the Fault Line: How Wealth Management Firms Can Successfully Navigate Shifting Market Dynamics

As the US approaches the Great Wealth Transfer where Baby Boomers will pass their assets to primarily Millennial and younger generations, financial advisors have a growing opportunity to capture new clients. A significant 72% of Millennials said they need financial advice but are unsure how to access it.¹ And Boomers are also finding they’ll still need advice as 61% of investors said their expectations for retirement have changed significantly in the last five years due to recent economic conditions.²

At first glance, this appears to be a boon for wealth management firms: Trillions of dollars will be moved, and people on both sides of these transactions need and want guidance. The reality, however, is firms are sitting on a fault line — caught between a fiercely competitive market subject to persistent inflation and shrinking profit margins and rising consumer expectations.

Investors want holistic, personalized, digital-forward services. And with so many financial advisors vying for new business, it’s a buyer’s market. The better equipped a wealth or asset manager is to deliver on client expectations, the stronger the potential for the relationship. Conversely, if investors’ expectations are not being met, they’ll leave their current advisors for those promising to better meet their needs.

To remain viable, efficient client retention and acquisition are essential. To thrive, wealth management firms must transform their services with optimized engagement strategies that provide holistic advice and minimize the impact of fraud within their financial ecosystems.

Acquiring younger investors

Identifying your ideal clients and effectively delivering your value proposition can help capture their attention. Regarding younger investors, the key is to meet them where they are: online. High-net-worth (HNW) investors aged 18 to 24 prioritize digital capabilities when selecting a wealth management provider. In fact, they ranked quality of online and digital services as their number one priority — above even investment performance and quality of advisor.³ If financial advisors want to compete with digital-first institutions, they must be on investors’ radars. A digital marketing strategy puts them in the right channel to reach their targets.

Justifying additional marketing spend may be challenging in this environment, but intensifying competition heightens the need to be in the right place at the right time to even have an opportunity to engage.

Retaining existing clients

Research tells us that one in four investors feel their providers don’t do enough to support their needs,⁴ and 46% of high-net-worth investors planned to change wealth management providers or add new wealth management relationships in the next 12 to 24 months.⁵

High client turnover can do serious damage to a firm’s bottom line. Retention efforts should therefore be just as vigorous as acquisitions to preserve profitability and prevent portfolio contraction. Here are a few strategies that can help bolster client retention:

Enhance engagement

Lack of communication and goal misalignment are the top two reasons clients leave their wealth managers.⁶ On the other hand, proactive regular communication can lead to higher satisfaction. A consistently executed outbound communication strategy that thoughtfully integrates clients’ needs and channel preferences can enhance overall experiences, foster trust and strengthen relationships. Additionally, efficiencies in outbound calling can aid in maximizing the time of your well-paid advisors.

Personalize holistic offerings

Investor expectations of wealth management services are rising with 47% wanting well-rounded advice across adjacent needs⁷ and 66% wanting increased personalization in their relationships.⁸ For example, having a fuller and clearer understanding of a client’s financial situation — informed by credit data and interactive financial management tools — can help advisors make better-informed and personalized wealth management recommendations. Delivering this differentiated value can foster deeper, more loyal connections.

Mitigate fraud

Losses due to investment fraud are at all-time highs with account takeover and new account fraud being the top fraud risks facing wealth and asset management firms. Consumers reported losing more than $4.6 billion to investment scams in 2023 — higher than any other category. To cultivate trust and protect profits, wealth management firms should continue diligent efforts to strengthen fraud frameworks and mitigate risk.

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As the wealth management industry is confronted by change due to evolving market dynamics and heightened investor expectations, we’re also on the precipice of a major transfer of wealth from Baby Boomers to younger generations. Wealth advisors would do well to focus on expanding and enriching marketing and fraud strategies, enabling them to best deliver on investor demands, enhance current and attract new relationships — and ultimately, fortify their portfolios.

For more information on effective client retention and acquisition strategies for wealth and asset management firms, get our Wealth Management Playbook or contact your TransUnion representative.