8 Trends Shaping the Future of Portfolio Management

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Portfolio > Asset Managers

8 Trends Shaping the Future of Portfolio Management

By Jeff Berman

Slideshow May 31, 2023 at 01:21 PM Share & Print

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Wally Okby, a strategic advisor at Aite-Novarica Group, explored eight trends that he says are shaping the future of portfolio management and reporting systems in the U.S. during a May 23 webinar.

Okby also provided insights and analysis on how wealth managers and vendors can better manage each other’s expectations and guidance for the buy side of this sector when it comes to pricing, services, integration and functionality, and other crucial aspects of portfolio management and reporting systems.

For example, he said, “development to the next level of aggregation to automate and digitize financial plans and proposal generation still lags behind expectations” in the sector.

Meanwhile, breakaway advisors “will need a solid operating platform for efficiency and scale now more than ever,” he noted.

In the gallery are the eight trends that Okby said are shaping the present and future of the portfolio management and reporting systems in the U.S.

Jeff Berman

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8 Trends Shaping the Future of Portfolio Management

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1. Holistic Practices
“RIAs are increasingly managing holistic practices,” according to Okby.

The channels that financial advisors affiliate with “have a significant influence on the types of products and services they provide,” he said.

“Wirehouses, unsurprisingly have the most comprehensive set of services [to] offer,” he said. “However, today independent RIAs and insurance broker-dealers fall a bit short, and we found gaps in trust and fiduciary services, credit and debt products, and nontraditional support services like elder care, career counseling and personal development.”

Independent BDs, RIAs and insurance BDs also have “meaningful opportunities to catch up concerning ESG, considered one of the most polarizing yet potentially lucrative and personal ways for wealth practices to deepen private client engagement,” he said.

“Therefore, it's really going to become more feasible and necessary for RIAs and insurance broker-dealers to integrate additional elements of holistic wealth” into their practices, he predicted.

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2. Wirehouse Broker Workstations
Wirehouse broker workstations, historically developed in-house, are “evolving and, in some cases, they’re deploying vendor technology,” Okby said.

That, he predicted, will “drive advisor revenue and productivity, personalize the investor experience, digitize the entire operation and deliver cost efficiencies.”

He added that fintech firms were also tactically expanding their presence to the wirehouse channel.

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3. Accelerating Wealth Transfer
The third trend Okby cited concerns the transfer of wealth. “It's accelerating. No surprise vendors had to nimbly change and adjust to wealth managers through client segmentation,” he said.

“While rapidly offering new clients personalized service levels, a wide range of new demands are being placed on RIAs, making their choice of portfolio management and reporting technology particularly important,” he said.

As a result, “in the last few years, even the most exclusive wealth management firms had to rethink their business models and target lower wealth client cohorts.”

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4. Regulatory and Compliance Integration
“Consumer privacy, data security, transparency, disclosure, and fiduciary responsibility [have] basically dropped on the financial services industry, which in turn, is driving technology adoption to run and maintain a well-regulated business,” Okby said.

His advice to brokers and RIAs: They need to “welcome and accept automated compliance and operational solutions to meet these increasing demands.”

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5. Value for Enhanced Services
“Practice management solutions were historically part of the custodial value that’s now shifting toward technology providers,” Okby said.

He added: “Envestnet has been particularly strategic and aggressive with its partnerships and acquisitions as of late to open its ecosystem for expansion.”

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6. Aggregation, Reporting, Analytics
“RIAs in our ecosystem often point to a common pain point, which is getting alternatives data that’s accurate and correctly deployed through their tech stacks,” Okby said.

“In other cases, vendors overpromise and underdeliver on their deployment,” he noted. So, for example, Aite-Novarica hears that advisors are “increasingly frustrated when data held on the broker-dealer platform isn't accurately integrated with platform applications in a bidirectional manner,” he said.

“A significant pain point for advisors is manual intervention to correct these data issues, which places a major drag on their efficiency,” he pointed out.

“Most of the wealth firms in our ecosystem have already started their aggregation and analytics initiatives,” he said.

But he added: “Hardly any have tackled cybersecurity or AI content generators yet.”

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7. Open Banking Wealth Management
“The concept of open banking is pushing financial institutions to change the way they work and how they provide access to their data,” Okby said. “In many countries, open banking is prompting [firms] to make their data available easily through APIs to third parties.”

While wealth managers haven’t been “heavily impacted by this, it's still a trend that we can’t just ignore,” Okby said.

He added: “Many firms are thinking about this strategically already and most traditional client reporting vendors catering to the wealth management sector are cloud ready and open banking compliant, and in some cases make frequent feature releases or even system replacements easier through their advanced architecture.”

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8. The Rise of Embedded Wealth Management
“Much like the growing opportunities around banking as a service, wealth management as a service is also rearing its head as an area with tremendous growth and revenue potential,” Okby said.

Although embedded wealth management is “still a young, nascent area,” he said it's “growing fast.”

He added: “It's all about making wealth management products and services frictionless and integral parts of different customer journeys and experiences. It's about giving financial institutions access to wealth management products like regulatory checks, investments, savings, credit checks and more in both out of the box and a preconfigured capacity.”

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