Study Highlights how End-To-End Platforms, Holistic Advice, AI, and the Rising Demand for Personalized Investments and Technology are Accelerating the Future of Financial Advice

BERWYN, Pa., Dec. 18, 2023 /PRNewswire/ -- With 2023 coming to a close, Envestnet, Inc. (NYSE: ENV), a leading provider of integrated technology, intelligent data and wealth solutions, announces significant trends shaping the future of financial advice. Drawn from research published by Envestnet's Market Intelligence Team, including an analysis of market data, third-party research, as well as an Envestnet survey fielded earlier this year, the comprehensive report highlights the evolving landscape of financial advisory services and the increasing role of technology in the sector – suggesting key themes and trends that will power advisor growth and shape the financial advice industry in 2024 and beyond.

"We sit at a unique vantage point for the 107,000 advisors who utilize our platform – clients that comprise every conceivable business model – each offering unique insights that drive innovation and enhancements to the Envestnet ecosystem," said Rich Aneser, Chief Strategy Officer for Envestnet. "We use the insights and enhancements to help wealth managers and our partners grow their business and deliver powerful, connected advice for their clients."

"The wealth management market has long faced challenges with fragmented technology and inefficient workflows," said Chris Shutler, Head of Strategic Development and Market Intelligence for Envestnet. "Our research highlights key trends such as industry and tech stack consolidation and convergence, the shift towards more complete financial life management, the growth opportunity for advisors offering retirement plans, and leveraging data and AI to provide personalized services. To not only improve service delivery but also stay competitive, it's crucial for firms and advisors to keep pace with these developments, addressing challenges through a holistic, integrated platform."

According to the report, the future of financial advice is being reshaped by trends including the following:

End-to-End Technology and True Integration for Advisors
The report highlights a significant demand among advisors for end-to-end technology platforms and improved integrations – important to consider given the availability of more than 400 wealthtech solutions in the market (Kitces AdvisorTech). This need extends beyond single sign-on capabilities to deep connectivity between systems and software providers. Further, even among their existing tech solutions, firms are looking to improve adoption and utilization rates to take full advantage of their investments. Some of the top areas noted in the survey as critical to the advisor experience included the integration of client engagement tools and improvement of custody workflows.

"Increasingly, we've seen more of our clients looking to consolidate and streamline the technology and solutions their advisors utilize, to provide a more unified experience for customers and make it easier for them to do business," added Shutler.

As an example, First Command Financial Services recently announced its partnership with Envestnet to provide its network of financial advisors access to the entirety Envestnet's integrated and unified financial ecosystem.

First Command's National Director of Advisor Operations John Osarczuk shared that "leveraging the Envestnet ecosystem provides our advisors with the technology and solutions they need to better serve clients through all stages of their financial lives – doing so efficiently and at scale."

Evolution Towards Holistic Advice
From an investment perspective, advisors have the potential to add 300+ basis points in annual value for clients, particularly through tax-efficiency and behavioral coaching. The report points out that amid this ongoing evolution towards more holistic advice, the scope of advice is expanding, and advisors increasingly need to add value beyond investments for their clients—such as through estate planning, tax advice, loan and credit management, life insurance, and health planning.

Envestnet | MoneyGuide has been ahead of this trend, providing tools to enhance capabilities for advisors whose practices incorporate financial planning. Its innovative and industry leading Goals-Based Planning digital experience can align investment strategies with specific goals and suggest ways to streamline their implementation. Its MyBlocks offering can help deconstruct the planning process into bite-sized modules that help clients best allocate their income and maximize every paycheck.

In addition, MoneyGuide Wealth Studios offers capabilities including an interactive demo of advanced estate planning strategies. It can help advisors address client cash flow questions prior to retirement, and model dynamic net worth over time.

Retirement as a Growing Opportunity for Advisors
The retirement market presents an underappreciated growth opportunity for advisors. Challenges in accessing workplace retirement plans for many SMBs, combined with regulatory tailwinds such as SECURE Act 2.0, and technology innovations are making it easier for non-retirement-expert advisors to offer retirement solutions. What's more, employers are increasingly looking to integrate financial wellness tools into their benefits packages as a competitive differentiator, yielding higher employee satisfaction, productivity, and employee retention rates. Looking ahead, Envestnet expects the workplace to prove to be a significant path for advisors to attract new assets.

"Retirement investors who are better informed about their complete financial picture are in a strong position to make better decisions," said Joe Smolen, Senior Vice President of Core and Institutional Markets at Empower, a leading retirement plan service provider. Empower and Envestnet recently partnered to launch an experience allowing plan sponsors to optimize retirement saving and planning for participants. Envestnet Retire Complete allows advisors to help businesses deliver value to their employees, while mitigating fiduciary concerns and service challenges associated with running a retirement plan.

Mr. Smolen added: "Together we have designed a state-of-the-art experience that allows plan sponsors to optimize retirement saving and planning for participants, while maintaining the flexibility to design features that work best for their organizations."

Leveraging Data and AI for Personalized Service
The research indicates a growing client demand for personalized services, achievable through data aggregation and next-best-action insights. According to the survey, a majority of advisors (60%) see the potential for these types of insights to improve their business or advice to clients but have yet to implement them. Of those firms who are leveraging AI-powered next-best-action insights, many are seeing not just enhanced efficiency but improved client interactions and service delivery such as when insights are integrated with their CRMs and advisors are supported with alerts for advice opportunities across any range of wealth, lending, or banking areas.

The machine learning models that power Envestnet's Insights Engine, a solution within Envestnet Wealth Analytics, offers more than 100 different types of data-driven insights for advisors, curated daily. This technology learns patterns from data and highlights certain sets of patterns to human experts who then decide how to act on these highlights. This can include establishing patterns in behaviors, account activity, and cash flows-- the Insights Engine calls out important deviations and opportunities for advisors to address with their clients. The team also regularly improves model performance from human feedback.

The importance of the trend is reinforced by Craig Iskowitz of Ezra Group, who shared his thoughts for the report on one way the industry will look entirely different five years from now: "AI-powered next best actions will disrupt the standard advisor workflow. These systems will drive efficiency, productivity and sales results to unheard of levels."

The Growth of Managed Accounts as a Preferred Choice

The advice industry is witnessing a migration from commission-based to fee-based accounts. Based on the report's analysis, managed account assets have seen double-digit growth across all distribution channels.1 Use of data, technology and the insights generated can help advisors determine and demonstrate that a managed account, and specifically a UMA, may be in a client's best interest. Within this segment, Envestnet expects UMAs to remain the fastest growth area of managed accounts as they allow multiple investment vehicles to be combined into a single account for a unified view and customized client solutions.

Envestnet's survey and analysis bring into focus the dynamic changes in the financial advisory sector, emphasizing the growing interconnection between technology, personalized service and comprehensive financial planning.

Financial advisors interested in learning more about these trends and insights are encouraged to contact Envestnet Market Intelligence for more information about the report.

Envestnet is transforming the way financial advice is delivered through an ecosystem of technology, solutions, and intelligence. By establishing the connections between people's daily financial decisions and long-term financial goals, Envestnet empowers them to make better sense of their finances and live an Intelligent Financial Life™. With more than $5.4 trillion in platform assets—more than 107,000 advisors, 16 of the 20 largest U.S. banks, 48 of the 50 largest wealth management and brokerage firms, more than 500 of the largest RIAs, and thousands of companies, depend on Envestnet technology and services to help drive better outcomes for their businesses and for their clients.

Envestnet refers to the family of operating subsidiaries of the public holding company, Envestnet, Inc. (NYSE: ENV). For more information, please visit www.envestnet.com, and follow us on LinkedIn and X (@ENVintel).

Retirement plan sponsors will always retain some fiduciary responsibility and should therefore conduct their own initial and ongoing research and due diligence on third party service providers, including but not limited to trustees, investment managers, recordkeepers and third-party administrators.

Potential transactions identified by the Insights Engine or Non-Managed Insights tool are based on concentrated positions, concentrated asset classes, and/or high cash allocations but do not include a fee analysis or other factors that should be taken into account when considering brokerage versus advisory accounts. Potential transactions identified by the Insights Engine are for informational purposes only and are not to be construed as an instruction to take any specific action. Envestnet, Inc. and its subsidiaries and affiliates are not responsible for any decisions or recommendations you may provide to your clients.

1 Cerulli Lodestar and Envestnet calculation, 2023

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SOURCE Envestnet