The Future of the Wealth Management Industry
The need for wealth management has become more vital than ever as inflation is on the rise and the cost of living in the United States is exponentially growing. Wealth management is a financial field that only continues to grow as more middle to upper-class members hire financial advisors. The need continues to grow as the importance of one’s finances was made vital following the COVID-19 pandemic. The economy continues to dwindle and the debt accumulated from college loans has only grown. However, following the large debt accumulation and new technology, what is the future of wealth management?
What is Wealth Management?
Wealth management is a growing finance sector that involves the use of financial institutions and certificated financial advisors to manage one’s finances and make the best existing finances/savings for retirement. The age for retirement has grown to at least 67, with many employees working even later to grow their savings. However, in recent years, wealth management has grown to include tax guidance and legal financial planning.
The Future of Wealth Management:
Artificial Intelligence
The use of AI has increased in popularity as wealth management services continue to increase in cost. New financial companies such as local banks and programming companies have detailed their interest in using personalized AI software that can make complex financial decisions for families and make the best of financial planning for retirement and savings. The cost of currently using a financial advisor is $7,000–55,00 a year and can grow, depending on the amount of money one has accumulated. The use of AI in the wealth management industry may result in cheaper service costs for families. Additionally, with recent advancements in AI technology, there lies the potential for new strategies in the wealth management industry to save an additional amount of money for users.
Cons: The use of AI could mean that thousands of jobs are lost in the wealth management industry as AI replaces workers. Additionally, the use of AI could undermine the personalized nature of wealth management and has the potential to make mistakes. AI is far from perfected and the same applies to the wealth management industry. Financial advisors must pass the CFP exam and need a 4-year degree from a prestigious university to be trusted with handling one’s income and financial future. Therefore, AI cannot make these complex decisions but over time may develop to take on the role of handling one’s income.
Digital Assets:
Although the traditional use of the stock market and complex trades continues to be used by financial wealth management institutions, wealth management must acclimate to using digital assets such as cryptocurrency to make more income long term for the better of retirement plans and savings. Cryptocurrency has seen a dramatic increase of over 173,000% of growth from 2015–2023. This spike is a demonstration that financial advisors must utilize the cryptocurrency market to their advantage and make as much money as possible for their clients.
Cons: The major con of the wealth management industry using cryptocurrency is that it may require that financial advisors and planners obtain new credentials and pass exams, curated to test their cryptocurrency knowledge. Investing in cryptocurrency is volatile and has the potential to grow one’s savings but also crush their existing income/savings. Additionally, having financial advisors take the time to pass exams may require the prices of hiring wealth management services higher.
Private Markets:
While wealth management services have mainly utilized public markets to make their clients the most potential income, private markets are becoming increasingly popular. For example, the private market value has increased to 22.6 trillion dollars, demonstrating the outperforming nature of private markets in comparison to public markets. Additionally, private markets are expected to yield 3 billion dollars by 2030 as their popularity increases. Accessing private equity and debt may prove to be a successful strategy that gives clients even more savings and yields a better financial future.
Cons: Understanding the private equity market takes careful consideration and may require additional education that our current wealth management workforce cannot utilize. While it may increase yield, it is important to note that the private market is a fairly new market for investing, compared to a public market.
Conclusion
The future of the wealth management industry is exciting and will likely continue to yield additional income and savings for clients. Inflation and growing financial concerns seen throughout the United States can be solved with better strategies and proper financial professionals. It is always important to consider that financial advisors and planners are the best way to leave your hard-deserved income with trained professionals who can efficiently and effectively manage your money. It is also important to note the potential for AI and the wealth management industry to work together with one another while keeping existing jobs and improving the yield for clients.
