Expanding Horizons
Key Takeaways
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Methodology
A Focus on Growth Is a Driver of Convergence
Technology is a Critical Tool to Scale Firms and Integrate Services
Charting a Course for the Future
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Hybrid Models Are Becoming More Common
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Client demand and the quest for scale are driving convergence of wealth management and retirement planning.
Introduction
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Convergence and How Advisors View the Challenges and Opportunities That Lie Ahead
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“We have 52 company restaurants, making us the largest operator of the restaurant brand. So, we are right there next to the franchisee. We know exactly what it takes to run them and what it takes to build them and what the challenges are, be they labor or food or whatever.”
- Scott Deviney, CEO, Chicken Salad Chick
As the markets recovered in 2023, advisors shifted focus from near-term economic and market concerns to longer-term planning. Wealth management and Retirement Plan Advisories (RPA) say they are focused on scale and seeking new pathways to build their business and stand out from the competition. According to the second annual survey of advisors by Marsh McLennan Agency and Wealth Management IQ, more advisors are offering hybrid retirement plan and wealth management services as clients seek more holistic advice and most advisors expect these two disciplines to converge in the future. Advisors largely remain focused on acquiring new high-net-worth clients to grow their practices, yet some are increasingly shifting their attention toward gaining institutional clients for growth. Though some firms are considering acquisitions to build client rosters, most are focused on organic growth and hiring to build their businesses. Meanwhile, many firms are considering sales and seeking succession plans as they think about their long-term plans. The 2023 survey looked at three different types of firms: wealth management firms who offer no retirement plan advice; retirement plan advisors (RPAs) who do not pursue wealth management clients from the plans they advise; and RPAs whose business model includes seeking out plan participants as wealth management clients.
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The information presented does not constitute legal, accounting, tax or financial advice. We try to provide quality information, but we make no claims, promises or guarantees about the accuracy, completeness or adequacy of the information contained in this webinar. Strategies mentioned in this webinar may not be suitable for you. As legal and other professional advice must be tailored to the specific circumstances of each case, and laws are constantly changing, nothing provided herein should be used as a substitute for the advice of a competent legal counsel or professional accountant, certified financial planner, tax preparer or other licensed professional.
Key Takeaway
1
As in 2022, more than three quarters of advisors believe the wealth and retirement segments will come together. That was true for advisors across all segments. In fact, the percentage of firms offering a hybrid model rose to 79% last year, up from 74% just a year earlier – showing that this convergence is well underway and continuing to gain ground. The melding of these two disciplines is being driven by client demand. Survey respondents report that clients are seeking more holistic advice and planning that includes both retirement and non-retirement assets. More than 75% of advisors say clients want a complete view of investments, rather than seeing assets in silos. On the wealth management side, advisors report that more than 80% of wealth management clients want to understand how their retirement investments integrate with their portfolio and more than 75% want more advice about the investments in their plans. The same trend was reported by advisors working with retirement plan clients who report that more than 70% of retirement plan clients want advice about non-plan assets. The need for holistic planning cuts across life stages as well. When it comes to retirement income planning, nearly 80% of advisors say clients want advice that incorporates all assets. As advisors look to grow their business, meeting the client demand for a more complete offering that takes into account both retirement plan assets and other wealth can be a valuable service. It may provide opportunities to expand existing client relationships and find new business.
Are the Wealth Management & RPA Segments Converging?
Question: Do you believe the wealth management and retirement plan advice (RPA) segments of the advisory business are converging? Base: 2023 respondents (n=476); 2022 respondents (n=447)
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As advisors look to the future, many are focused on scale. In the 2023 survey, more than half of the advisors we spoke to said achieving scale is critical or very important to the future of their business.
37% of advisors said new high-net-worth clients are a top growth opportunity (7% downward shift from last year).
Plans to Expand Wealth Management Services Business
Many advisors say that offering holistic planning by creating a hybrid retirement planning and wealth advice firm may be one path to achieve growth and to help maintain a competitive offering.
73% of wealth management advisors who do not offer retirement plan advice currently, say they may start in the next two years (up from 67% last year).
41% of advisors are successful in capturing rollovers into individual accounts after a client separates from service.
64% of advisors say challenges to hybrid models include different skillsets and motivations required for these businesses. Wealth managers who do not offer retirement advisory services cite hurdles including infrastructure, regulatory challenges and the economics of the business model.
Hiring experienced advisors may provide solutions to some of these challenges. Almost half of companies looking to expand into retirement advisory services may hire experienced advisors (41%).
Question: Over the next two years are you considering expanding your wealth management services/RPA business? Base: Respondents providing retirement services, but not pursuing wealth management clients from retirement plans (2023, n=91; 2022, n=59).
Plans to Expand RPA Business
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“It’s a fairly reasonable way to get new guests in your restaurant, partly because third-party delivery is bringing them there.”
Technology is a key asset for firms as they look to achieve scale and broaden their service offerings. In the survey, 45% of advisors cited technology as a key factor making it feasible to offer integrated services. In 2022, 72% of advisors felt their technology was equipped for current and long-term demand. But fewer advisors reported feeling positive in the 2023 survey. Just 66% of advisors felt their technology was satisfactory. When it comes to broker dealer provided solutions, the results are even worse, with a mere 38% of advisors believing their broker dealer provides all the technology solutions they need. Advisors have been working hard to improve the technology they use. Over the past 2 years, advisors say their biggest accomplishments have been making information more personalized, customized, and mobile friendly. But survey results show there is more work to be done. More than 65% of advisors said they are planning to invest more in technology to help build scale and almost a third of advisors would consider another broker-dealer for better technology. When it comes to unmet needs, advisors are looking for tech that offers more flexibility and safety. In the 2023 survey, advisors cited customization, personalization and security as their greatest technology needs.
Among Next-Gen Advisors, 39% believe technology is a differentiating factor for their firm, versus just 25% of Established Advisors.
Agreement Statements Concerning Technology
Question: To what extent do you agree or disagree with the following statements concerning technology? Base: All respondents; multiple answers permitted (2023, n=476; 2022, n=447)
NET Agreement (% Indicating “Strongly agree” or “Agree)
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In 2023, advisor concerns have shifted with the markets and economic outlook from near term-concerns to longer-term planning. In 2022, recession and market decline concerns were cited as a major challenge last year by 51% of advisors. Advisors responded to the market downturn with communications, relying on existing communication strategies and augmenting them with additional outreach. A small percentage of advisors recommended investment changes, including larger cash positions. Most clients accepted the downturn as a normal part of investing. Just 31% of advisors cited the market and economy as a top concern. With growing comfort about investment context, fewer advisors were focused on cost savings — the percentage of advisors focused on business efficiency fell from 51% to 39%, and fewer advisors were focused on margins. In 2023, more advisors are thinking about the long-term plans for their own businesses. According to the survey, fewer than half of advisors have a formal succession plan and the number of advisors looking for an exit strategy rose from 13% to 15%. More firms may be up for sale. The number of advisors open to sales or currently planning a sale grew, from 32% in 2022 to 37% this year. According to the survey, advisors considering sales want to maximize value and provide quality ongoing service for clients.
Openness to Being Acquired
Question: Would your firm consider being acquired by a larger firm or larger advisory practice? Base: All respondents (2023, n=476; 2022, n=447)
Methodology, data collection and analysis by WealthManagement.com in cooperation with MMA. Data collected June 22 – July 18, 2023. Methodology conforms to accepted marketing research methods, practices and procedures.
OVERVIEW
METHODOLOGY
RESPONSE MOTIVATION
Beginning on June 22, 2023, WealthManagement.com emailed invitations to participate in an online survey to active users. By July 18, 2023, WealthManagement.com had received 476 completed responses. Comparative data was collected October 26-31, 2022, yielding 447 completed responses.
To encourage prompt response and increase the response rate overall, email invitations and survey materials were branded with the WealthManagement.com name and logo to capitalize on user affinity for this valued brand. Each respondent was afforded the opportunity to receive a $10 Starbucks gift card as a token of appreciation for their participation in the survey.
Marsh McLennan Agency (MMA) provides business insurance, employee health & benefits, retirement, and private client insurance solutions to organizations and individuals seeking limitless possibilities. With over 9,500 colleagues and 170 offices across North America, MMA combines the personalized service model of a local consultant with the global resources of the world’s leading professional services firm, Marsh McLennan (NYSE: MMC). Securities and investment advisory services offered through MMA Securities LLC (MMA Securities), member FINRA / SIPC, and a federally registered investment advisor. Main Office: 1166 Avenue of the Americas, New York, NY 10036. Phone: (212) 345-5000. Variable insurance products distributed by MMA Securities LLC, CA OK 81142. Marsh & McLennan Insurance Agency LLC and MMA Securities LLC are affiliates owned by Marsh & McLennan Companies. Investment advisory services for MMA Prosper WiseSM are offered solely as a Registered Investment Adviser through MMA Securities. Certain of our investment adviser representatives are registered representatives of MMA Securities. A copy of our written disclosure statement discussing our advisory services and fees is available for your review upon request. Please consult a tax professional for specific tax inquiries and recommendations. The information contained in this document is for education purposes only and is not intended to provide individual investment advice.
DISCLOSURES
Securities and investment advisory services offered through MMA Securities LLC (MMA Securities), member FINRA / SIPC, and a federally registered investment advisor. Main Office: 1166 Avenue of the Americas, New York, NY 10036. Phone: (212) 345-5000. Variable insurance products distributed by MMA Securities LLC, CA OK 81142. Marsh & McLennan Insurance Agency LLC and MMA Securities LLC are affiliates owned by Marsh & McLennan Companies. Investment advisory services for MMA Prosper WiseSM are offered solely as a Registered Investment Adviser through MMA Securities. Certain of our investment adviser representatives are registered representatives of MMA Securities. A copy of our written disclosure statement discussing our advisory services and fees is available for your review upon request. Please consult a tax professional for specific tax inquiries and recommendations. The information contained in this document is for education purposes only and is not intended to provide individual investment advice.
Methodology conforms to accepted marketing research methods, practices and procedures.
received 476 completed responses. Comparative data was collected October 26-31, 2022, yielding 447 completed responses.
logo to capitalize on user affinity for this valued brand. Each respondent was afforded the opportunity to receive a $10 Starbucks gift card as a token of appreciation for their participation in the survey.
and individuals seeking limitless possibilities. With over 9,500 colleagues and 170 offices across North America, MMA combines the personalized service model of a local consultant with the global resources of the world’s leading professional services firm, Marsh McLennan (NYSE: MMC). Securities and investment advisory services offered through MMA Securities LLC (MMA Securities), member FINRA / SIPC, and a federally registered investment advisor. Main Office: 1166 Avenue of the Americas, New York, NY 10036. Phone: (212) 345-5000. Variable insurance products distributed by MMA Securities LLC, CA OK 81142. Marsh & McLennan Insurance Agency LLC and MMA Securities LLC are affiliates owned by Marsh & McLennan Companies. Investment advisory services for MMA Prosper WiseSM are offered solely as a Registered Investment Adviser through MMA Securities. Certain of our investment adviser representatives are registered representatives of MMA Securities. A copy of our written disclosure statement discussing our advisory services and fees is available for your review upon request. Please consult a tax professional for specific tax inquiries and recommendations. The information contained in this document is for education purposes only and is not intended to provide individual investment advice.
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Shaping Future Success: Financial Advisors Embrace Convergence, Growth, and Technology
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Driving convergence in wealth management and retirement planning
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