The Top Wealth Management Trends for 2009

In TowerGroup’s recent report of “Top 10 Business Drivers” for brokerage and wealth management firms, the firm listed regulatory changes as a big part of 2009 going forth. That is typically seen after an upheaval in the market, said Sean Cunniff, research director, Brokerage & Wealth Management at TowerGroup, in an interview with PLANADVISER.com.

Retirement plan advisers are, of course, seeing this in the forthcoming disclosure regulations. Also, the Pension Protection Act and other regulations puts increasing pressure on retirement plan advisers to be fiduciaries, said Cuniff, who co-authored the report. “There is going to be continued increased pressure for advisers to accept fiduciary responsibility,” he said. “Some firms have embraced it, but particular firms that have come up under the brokerage model have shied away from it.”

Independents’ Day

The wealth management space is one of the healthiest parts of the financial industry, Cunniff noted, and TowerGroup expects it to emerge stronger after the crisis. Cunniff said that some investors might be turning away from advice because of distrust of the financial industry, but others are requiring it more than ever. Overall, the increased demand for topnotch advisers will put more emphasis on competition for the best advisers and most cutting edge technology.

Top-producing advisers are in strong demand right now at all levels of the adviser space, but the dually registered and registered investment adviser (RIA) space is particularly showing the most inflow (see “Competition For Advisers Heats Up’)—a trend Cunniff expects to continue.

Going hand-in-hand with the move toward independent advisory services is the move away from transaction-based service toward fee-based service. “The pure transaction broker hasn’t gone away but certainly seems to be losing the battle of adviser inflows,” Cunniff said. That is true in the retirement plan space as well, he said: “I think you’re also going to see increased interest in a kind of fee-based compensation model for 401(k) plans.”

Life Adviser

TowerGroup’s research notes the trend toward more holistic financial planning. Cunniff said on the retirement side, advisers will see both the opportunity and the pressure to offer individualized advice to participants rather than just investment advice to the plan sponsor, and the regulatory environment will be a large influence.

Across all types of adviser business, TowerGroup says the concept of retirement will evolve over time as many individuals work longer than expected or part-time into retirement. Meanwhile, the role of the financial adviser will evolve into that of a “life adviser.” For instance, advisers in the high-net-worth space will deal with concerns such as estate planning and transitioning clients’ businesses (see “More than Investment Management: HNWIs Want Comprehensive Services“). The mass affluent market will increasingly have concerns about health care and whether they will have enough savings in retirement, as well as how to guarantee that savings.

But that seems like a lot of hats for the adviser, doesn’t it? “The bottom line is there are very few if any advisers who can really do all of this all by themselves,” Cunniff said. The approaches TowerGroup foresees advisers taking at the wirehouse level include a team-based approach in which several advisers specialize in different areas. Cunniff also said that the industry in the mass market will move more toward the “center of expertise,” in which the adviser serves a relationship manager connecting pockets of expertise within the institution, even using technology such as video conferencing to connect the different expertise areas.

On the RIA side, more advisers might have referral arrangements. It might also become more common to see accounting firms partnering with or starting their own advisory firms, Cunniff said. Overall, TowerGroup says that, in the long term, consumers will benefit as advisers take a more holistic approach to managing clients’ assets.