Differentiation is often discussed in our industry, but action is sometimes frustratingly slow to follow. Despite taking the time to get to know clients on a personal basis, advisors frequently utilize generic funds, fabricated and distributed by some of the largest asset managers in the world. Instead of curating an investment for a specific investor, advisors are tempted to lump their book of business into a handful of common investments.
Advisors and investors aren’t the only individuals facing the challenge of differentiation. For their part, asset managers and wholesalers – especially if they have a unique product – struggle to find the right wealth managers, family offices and accredited investors for their funds. They’re often seen more as an annoyance, instead of a useful source of information with tailored tools that can help advisors find the exact product their clients need.
It’s a broken marketplace, with major consequences. As advanced computing is driving unprecedented growth across every industry, why are fund managers still doing handwritten research on financial advisors? Why do advisors struggle to find a personalized, investor-appropriate fund? Capital introductions are inefficient, outdated and expensive, but they don’t have to be that way.
Consider the advantages available to advisors utilizing regionally familiar assets and funds when working with investors from a specific corner of the globe. It’s not a hypothetical scenario: in recent months, Latin America-based investors have been moving their assets to Miami-based wealth management firms at record pace, according to media reports. This influx of investments has brought new opportunity and growth, as firms in Miami boost their employee headcount and oversee billions in newfound assets.
Generational differences can present a similar opportunity. Advisors across the country are currently navigating a massive generational transfer of wealth, with an estimated $84 trillion in assets expected to change hands at least once by 2045, according to an industry report.
Firms with established advisory relationships and strong connections to younger clients are positioned to succeed in the coming years. Advisors who are fluent in the thought processes and outlooks of the next generation need investments that allow them to demonstrate their commitment to serving a new group of investors through tangible, tailored action.
At the same time, so-called emerging funds have also proven to be better investments than more established funds, according to a peer-reviewed study, because they’re incentivized to prove themselves and can adapt their strategies to changing market conditions more quickly than established fund managers overseeing massive funds.
Traditionally, however, these smaller funds have less visibility, making it more difficult for advisors and investors to make the right investment. But with the power of machine learning, advisors can sort through a seemingly endless array of funds to find and add top-quality strategies to their clients’ portfolios.
Modern Capital Introductions Need To Be Personal
At AssetLink, we see the challenge of differentiation boiling down to technological needs and unaddressed opportunities.
On one hand, the industry needs a platform that leverages artificial intelligence and machine learning, making it easier for investors to find the right product – or for product builders to find the right advisor or investor. With nearly 730,000 investment advisor representatives working in the RIA market, a small asset management firm with a tailored, niche product quickly realizes that without the right technology, it’s next to impossible to find a suitable advisor or investor. The large shadow cast by behemoth asset managers has left advisors and diverse asset managers stumbling in darkness, unable to find one another.
With a tech solution in place, the wealth management industry can turn to unaddressed opportunities. True differentiation and diversification mean the 20 largest asset managers play just one part – not all the parts – in a larger, more colorful investing environment. Regardless of the size of an asset manager, fund selection should revolve around an asset manager’s skills, coupled with a client’s investment preferences.
Whether advisors are serving clients relocating their wealth from one corner of the globe to another, meeting the needs of their next-gen clients, weighing the potential of a smaller fund, or considering how they want to differentiate their offerings and advice, they need technology that unlocks opportunity. By deploying a data-centric, AI-enhanced approach to matching product fit and need, AssetLink seeks to revolutionize our industry while positioning advisors, investors, asset managers and family offices for a future that’s anything but generic.
Devon Drew is the Founder and CEO of AssetLink.