Global Report

Next: The Wealth Management Firm of the Future

Driving Firm Growth and Success: A 2023 Mid-Year Update

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Overview

Defining success for wealth management firms and identifying its drivers were the objectives of research conducted last year by Wealth Management IQ in partnership with BNY Mellon Pershing. Results of that research were published in a white paper, Next: The Wealth Management Firm of the Future To update that report and note any significant changes in how firms view their growth prospects after a tumultuous period of economic and market change, a comparable group of advisors and wealth management firm leaders were surveyed in April and May 2023. The results of that research are presented in this report.

Survey Highlights

Firm growth expectations are now modestly lower and 31% of respondents cite the ability to generate organic growth as the most important driver of growth overall.
62% of respondents say they will increase their investment in technology.
To drive growth, more firms will be looking to hire business development and marketing-related personnel than in the past.

Respondents

At a Glance

While respondents to the most recent survey and to the earlier survey were different, their demographic profiles are extremely similar, making comparisons statistically valid. Below, a snapshot of current survey respondents.

Takeaway & Suggestion

More Moderate Expectations and a Focus on Organic Growth

How will advisors and their firms generate that growth? Creating an improved client experience, expanding services, and improving workflows and efficiency are now considered less important growth drivers than last year. The chief driver, say 31% of respondents, is the ability to generate organic growth.

Most Important Contributor to Firm Growth This Year

Sources of Firm Growth

Almost identical to responses last year, advisors anticipate that the leading sources of growth will be referrals, new business from existing clients and business development.

While mergers and acquisitions have attracted considerable attention in recent years, particularly in the RIA channel, that inorganic route to growth remains relatively underused by most respondents. More than two-thirds of those surveyed — 68% — say they have not participated in any M&A activity over the past two years, much like the 72% who responded similarly a year ago. Over the next five years, 41% of survey respondents said they expect their firm will not make any acquisitions (versus 54% a year ago), while 26% thought their firm would make one acquisition over that time period, versus 21% a year ago.

“Organic growth is our focus since combining technology and cultures is a challenge when growing through M&A.”

Ina Toderita, Director of Operations, Balentine

Primary Reason for Investing in Technology

Takeaway & Suggestion

Investing in Technology and People

Technology and human capital remain the primary drivers of wealth management firm growth and success. This year as in the past, a majority of firms — currently 62%— intend to spend more on technology, with 31% saying they see no material change in their spending, and just 7% saying they plan to cut tech spending. The major objectives for investments in technology are improving the client experience and improving firm efficiency, similar to last year’s results. A distant third reason for tech spending is to drive growth by creating capacity to support more clients.

“At my former firm, I hired a support person whose work and relationships with clients were fantastic. We groomed him and now he’s ‘killing it’ as an FA.”

Carina Diamond

Key Takeaways

As firms place increasing emphasis on organic growth, look for more investment in business development and marketing. This is likely to include technology-related spending to support web-based marketing efforts as well as human capital investments in roles that drive growth.
Advisors will continue to increase their investments in technology to improve the overall client experience and improve efficiency.
Human capital needs remain one of the greatest challenges of the wealth management business as competition for talent is at an all-time high and the talent pool does not appear large enough to meet demand.