Wealthtech Trends That Dominated 2023, And Will In 2024

Larry Roth, CEO, Wealth Solutions Report
Larry Roth, CEO, Wealth Solutions Report

Executives From Morningstar, Opto Investments And Wealth.com Explain How Technology Is Changing The Game For Advisors And Their Firms

As I endeavored to identify the wealthtech trends that dominated 2023 and are poised to do so in 2024, I had to remind myself that for all the attention drawn to generative artificial intelligence this year, AI ultimately is an emerging tool that wealth management firms are still figuring out how to unlock true value from, in service to financial advisors and their clients.

With client service in mind, I kept returning to the pace of platform integrations as among the most potent value drivers for advisors and their firms. Why? Because proper integration minimizes manual labor, saves time and leads to new capabilities. Three wealthtech vendors in particular exemplified this trend in 2023: Orion, Nitrogen and Envestnet.

Abundance of Integration

Envestnet’s iCapital integration allows advisors to add fee-based structured investments into proposals, transact on those products and assess them next to more traditional asset classes. Its Empower integration enables the retirement plan service provider to integrate its tech and asset management capabilities in the Envestnet ecosystem. Its Goalsetter integration helps advisors provide tools to build generational wealth for clients while capturing next-gen clients. First Command Financial Services also gave its advisors access to Envestnet’s platform.

Orion Advisor Solutions connected its client portal within Redtail CRM to improve how advisors attract prospects and onboard new clients. Orion enhanced its Schwab Advisor Services custodial integration, with real-time data, automated Schwab money market fund investing and upgraded advisor trading workflows. In addition, Orion integrated with FP Alpha so all client information that is imported will show up on FP Alpha’s General Questionnaire already filled out.

With client service in mind, I kept returning to the pace of platform integrations.

Nitrogen’s integrations included partnering with marketing specialists. Its Snappy Kraken integration strives to help advisors capture leads and allow advisors to launch automated marketing campaigns. Its FMG partnership integrates the email marketing and website creation capabilities of the FMG digital marketing platform with the risk alignment, financial planning, proposal generation and client engagement tools of the Nitrogen Growth Platform.

Orion and Nitrogen also enhanced integration to bring accounts and models directly into the proposal process in Nitrogen, with Orion’s Portfolio Groups reflected as Account Groups in Nitrogen. The companies’ additional planned integrations also included bringing Orion’s aggregated account feeds into Nitrogen’s compliance analytics.

But integration is far from the only major wealthtech trend of importance to advisors and their firms heading into 2024. That’s why WSR recently gathered perspectives from executives at Morningstar, Opto Investments and Wealth.com. Not only did they share their insights on the trends that matter, they explained what their respective companies are doing to meet those challenges.

Morningstar

Marc DeMoss, Head of Research Products, Morningstar
Marc DeMoss, Head of Research Products, Morningstar

Marc DeMoss, Head of Research Products at Morningstar, pointed to its 2023 “Voice of the Advisor Research,” published in September, for which Morningstar surveyed 400 U.S. investors and 650 U.S. advisors evenly distributed across firm types.

“Being able to offer personalized recommendations is key for advisors,” DeMoss said. “The most impactful elements of personalization involve aligning clients’ risk tolerance with their goals and needs. Advisors want to offer a more comprehensive set of products and services than they typically have in the past, primarily in the form of alternative assets and new planning services.”

Alternatives such as cryptocurrency, structured products, liquid alternatives, REITs, private debt and private equity make up between 14% and 19% of the total assets under management (AUM) of advisors who are offering more products, according to Morningstar’s survey. For services, it found that 27% of advisors intended to expand the services they offer in the next 12 months, with sustainability advice and education planning leading the way.

Concerning regulations, the SEC Marketing Rule has changed how advisors can demonstrate historical performance of potential investment recommendations to clients. Performance data shown must now follow a specified framework, and the returns shown have to include any fees that client would have paid. This has required advisors to retool how they gather the relevant data, according to DeMoss.

“Advisors need help with basically all tasks that aren’t client-facing so that they have as much time as possible to focus on client interaction,” DeMoss said. “This focus on the advisor-client relationship includes helping to identify and achieve specific life goals as well as customizing an investment strategy to risk tolerance, tax optimization and time horizon.”

Morningstar has released several tools to address these wealth management needs. The new Investment Planning Experience – which is available in Morningstar Advisor Workstation as well as through the Risk Profiler API within Morningstar Direct Web Services – creates personalized investment plan recommendations to clients that cover goals, risk and research.

The Morningstar Intelligence Engine is the set of generative AI building blocks on which the chatbot research assistant known as “Mo” is built. Firms can use the Intelligence Engine API within Morningstar Direct Web Services to create personalized digital experiences for their advisors and advisors’ end clients.

Morningstar also recently launched the Enterprise Analytics suite of dashboards, which surfaces business intelligence based on firmwide activities of advisors using Advisor Workstation. The three dashboards – Compliance, Insights and Performance – help identify data such as the percentage of proposals that may pose a regulatory risk, month-over-month trends in proposal volume, and the breakdown of most frequently proposed asset classes. It also allows firms to compare their activity to industry benchmarks.

Opto Investments

Ryan VanGorder, CEO, Opto Investments
Ryan VanGorder, CEO, Opto Investments

“The trends we see front and center in the wealthtech community are those that are supporting the challenges associated with scale, efficiency and differentiation,” said Ryan VanGorder, CEO at Opto Investments, a private markets investment platform that helps RIAs access alternatives. “Addressing these themes allows for growing businesses to do more with less, enabling advisors to deliver a higher quality experience across a wider client base and make sure that their brand is associated with a stellar experience.”

He argues that although advisors often end up trying to navigate a patchwork of unintuitive tech solutions that create new work and confusion, more holistic and integrated solutions can allow advisors to scale efficiency. By making their platforms more efficient, advisors can deliver a highly quality, customized experience for their clients, which has historically been lacking, particularly in the alternative investment space, according to VanGorder.

Opto Investments aims to solve these issues in a few ways. Crucial to the company mission is aligning with advisors and building software that addresses analyzing, investing in and reporting on the returns associated with private markets. Opto also creates custom funds that seek to align with advisor strategies and allow for meaningful exposures, strategy aligned narratives and a branded experience focused on alpha generation.

“These allow for diversified exposures across sought after strategies, managers and direct investments with a streamlined experience across the whole workflow and the simplicity of a single K1,” VanGorder said.

This year, in addition to integrating with tru Independence and Nitrogen to expand advisors’ access to the private markets, Opto enhanced its custom funds capabilities for RIAs. As a result, RIAs can create and manage white-label fund strategies across private credit, equity, real estate, venture capital and infrastructure. The solution includes a due diligence process and multi-manager approach to curating investment opportunities.

Wealth.com

Rafael Loureiro, Co-Founder and CEO, Wealth.com
Rafael Loureiro, Co-Founder and CEO, Wealth.com

Rafael Loureiro, Co-Founder and CEO at the digital estate planning platform Wealth.com, sees three key wealthtech trends for 2024: Rapidly increasing service provider options, greater urgency to service a more diverse range of client segments and balancing digital-first expectations with the value of human engagement.

“This presents a navigation challenge for advisors whose time is best spent focusing on serving clients and not translating tech jargon,” Loureiro said. “Leaders will emerge because they focus on solutions that save advisors time and truly optimize both the advisor’s practice and client experience.”

He advises the wealthtech industry to recognize that the majority of wealth passed down in the Great Wealth Transfer will go to women, because very few existing wealthtech solutions are currently designed to cater to women inheriting significant assets. Loureiro also emphasizes that, in the race to meet next-gen clients where they are digitally, advisors must remember what makes their own businesses invaluable: their expertise, personal touch and dedication to client service.

As for what Wealth.com is doing to fill this void, the company recently established an Advisor Council to uncover ways of infusing input, from a wide array of industry experts who serve unique client demographics, into Wealth.com’s corporate DNA. It also launched Ester, an AI-based legal assistant that aims to help financial advisors make estate planning more accessible, cost effective and scalable.

Wealth.com uses inclusive provisions in its documents, such as accounting for desires to include frozen genetic material in estate plans and which pronouns to use. And since the advisor is usually one of the first people to receive a call during an unfortunate life event with financial ramifications, Wealth.com has worked to minimize friction so advisors can help the people in their client’s plan navigate situations if unexpected events occur.

“We take advisor time extremely seriously, and our focus is on understanding the specific advisor’s pain points and solving them, not just selling a product,” Loureiro said. “Therefore, from day one, we focused on product integration.”

Larry Roth is CEO of Wealth Solutions Report and Managing Director of RLR Strategic Partners.

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