1、Global Banking&SecuritiesUS wealth management:Amid market turbulence,an industry converges Traditional delivery models may soon be history,as firms of all stripes broaden both their offerings and their target client and adviser segments.The competition will be intense.January 2024 Getty Imagesby Joh

2、n Euart,Jonathan Godsall,Vlad Golyk,and Jill Zucker Table of contentsExecutive summary 2The good,the bad,and the rest:An economic overview 4Convergence is here 12Agenda for a new industry landscape 202 2US wealth management:Amid market turbulence,an industry convergesThe approaching end of a decade-

3、long run of growth fueled by market performance and net interest income,though somewhat expected,will be a rude awakening for US wealth managers.Over the past ten years,through the emergence of new models,shifting client preferences,and operational ups and downs,firms grew used toin some cases,relia

4、nt uponmarket-driven growth in assets.Assuming that the tailwind is waning,at least for a time,it will soon become apparent which firms remained operationally sharp during the good times and which overrelied on external forces.Equity and bond markets suffered simultaneous declines in 2022,with the S

5、&P 500 down nearly 20 percent and the US aggregate bond index experiencing the worst year of performance since inception.This market downturn,unmatched since the financial crisis of 2008,erased close to 50 percent of the cumulative market appreciation from the preceding five years.However,the swifte

6、st escalation in interest rates in over half a century took the sting out of this market decline:even compared against 2021s record(market-driven)growth,US wealth managers achieved strong results in 2022.Revenues and profits rose by 6 and 8 percent,respectively,resulting in a one-percentage-point in

7、crease in overall profit margins.Performance in the first three quarters of 2023 has remained positive,albeit not as strong as in 2022.Interest rates increased by a further 100 basis points,and equity markets briefly achieved full recovery before sliding againthe S&P 500 was up 9 percent at the end

8、of the third quarter,compared with 20 percent at the peak.From wealth managers perspective,2022 may have represented a transitional year in which a historically sudden surge of inflation was offset by rising interest rates.And 2023 may be the beginning of a period during which the industrys resilien

9、ce is tested more thoroughly as the softening action of high interest rates gradually fades.Grappling with shifts in the macro environment is already a stiff challenge for US wealth managers,but another long-brewing trend is close to becoming a permanent feature of the industry landscape.The industr

10、y has long been organized along distinct lines in terms of delivery models and client segments.This structure has been gradually loosening,as wealth delivery models of all kinds expand beyond their old borders,shaking off traditional limitations on what services they offer clients and advisers and w

11、hich clients and advisers they serve.Technology is accelerating this transition.And whether wealth management firms have a large in-house technology function,rely largely on WealthTech vendors,or operate somewhere in between,most are now as reliant on technology as they are on people.Technologys imp

12、ortance will deepen as generative AI demonstrates its enormous potential for boosting productivity,improving client experience,and supporting growth.Some firms have already announced initiatives to equip their advisers with tools that rapidly synthesize insights they can use in real time with client

13、s,while others are exploring use cases that leverage gen AI for content creation and A/B testing to significantly improve prospect engagement.As convergence in the US wealth management industry accelerates,competition will intensify.This situation calls on individual firms to carefully consider whic

14、h big bets they can make now to stay relevant to their clients and advisers under the new competitive paradigm.Many will determine that they need new recipes for growth.Strategic clues come from the practices of top performers,which reaped disproportionate rewards in 2022.The fastest-growing firms t

15、end to have access Executive summary3Title of literature 3US wealth management:Amid market turbulence,an industry converges to proprietary lead generation channels(for example,workplace),have expanded their offerings(adding banking in particular),offer superior multi-segment adviser value propositio

16、ns,have scalable infrastructure,and make disciplined M&A choices.These markers transcend legacy lines between the delivery models.Firms that benefited from rising interest rates have a unique opportunity to reinvest into the business for the future,while the rest will need to make tougher choices an

17、d free up capacity that can be redeployed toward long-term growth.As we detail later in this report,firms can position themselves for the new dynamics at play by focusing on six areas:expanding offerings,building centralized lead generation capabilities,developing a talent attraction strategy,levera

18、ging gen AI for adviser and other client-facing staff productivity,reallocating resources,and redesigning their operating models for scalability and flexibility.4US wealth management:Amid market turbulence,an industry converges After a decade of nearly unbroken growth driven by market appreciation,t

19、he US wealth management industry experienced a significant contraction in 2022(Exhibit 1).Client assets overseen by the industry declined by$6.2 trillion,erasing almost a year and a half of market appreciation.Market performance accounted for$7.6 trillion of the decline and was offset slightly by$1.

20、4 trillion of net inflows (2.8 percent organic growth).This compares with 6.2 percent organic growth in 2021($2.6 trillion),which was bolstered by favorable economic conditions and federal stimulus money.The saving graces were interest rate hikes,which enabled the industry to fare relatively well de

21、spite major headwinds.Over the course of 2022,the Federal Reserve increased the federal funds rate by a total of 425 basis points to the highest level since 2008.Wealth management revenues,profits,and profit margins continued on their growth trajectories,increasing 6 percent,8 percent,and one percen

22、tage point,respectively in 2022,further validating the industrys resilience and attractive fundamentals.Beneath the positive headline performance was significant variance in results between individual firms,strongly correlated with each firms ability to extract bottom-line impact from rising interes

23、t rates.For winners,this created a unique opportunity to secure additional financial capacity they can reinvest in the business.Exhibit 1 After a decade of growth,US wealth management client assets contracted in 2022 as a result of negative market performance.The good,the bad,and the rest:An economi

24、c overviewAfter a decade of growth,US wealth management client assets contracted in 2022 as a result of negative market performance.Client assets,US,1$tprllron1Yeap-end U oealth ranagep clrent assets.Includes petarl assets orth oealth rntepredrapres(eg,bpokepdealeps,drgrtal-drpect fprs,and prvate ba

25、nks).Ecludes drpectly held secuprtres(eg,thpough er loyee stock lan o trons op bonds upchased drpectly fpor the govepnrent)and rnstrtutronal assets(such as ensrons).oupce:Cepullr Assocratess ublrc flrngss ccrnsey ealth anagerent upveyMcKinsey&Company200002

26、.62.71.90.41.93.75.36.28.544.88?CA?12.311.96.20.3Net foos apket epfoprance2012 base2.83.14.13.33.43.43.64.06.22.8Net foos as?of begrnnrng-of-yeap AU 5US wealth management:Amid market turbulence,an industry converges Asset growth concentrated at the top,againIn 2022,industry net flows decreased by 3.

27、4 percentage points to an average of 2.8 percent(below the ten-year average of 3.8 percent between 2012 and 2021).The trend of wide disparity in performance across delivery modelsas well as between firms and adviserscontinued.As is often the case,the benefits of growth settled at the top of the indu

28、stry.In the years leading up to 2022,organic growth disproportionately accrued to digital-direct wealth managers(sometimes referred to as online brokerages)and registered investment advisers(RIAs).RIAs,despite seeing their net flows approximately halve,recorded the highest net flows of any channel,a

29、t 5 percent in 2022(Exhibit 2).They outpaced digital-direct firms,which experienced more muted growth:net flows declined by almost four percentage points to a total of 3 percentslightly above the average for the industry and well below the 201721 average of 6.5 percent.Digital-direct firms faced two

30、 challenging factors.First,2021s record-high levels of new account openings were unsustainable,as they resulted in large part from a confluence of favorable market conditions,social-media-driven uptake of trading(so-called meme stocks),and the stimulus money distributed to households.In fact,based o

31、n our analysis of public filings,the growth in number of self-directed accounts overall declined sharply to 7 percent,compared with 27 percent year-over-year growth in 2021.Second,a flight to advice is common in economic downturns and periods of increased volatility.According to McKinseys 2023 Afflu

32、ent and High-Net-Worth Consumer Insights Survey,among clients who have both a self-directed account and a traditional adviser,58 percent actively reallocated assets to their adviser in 2022.Exhibit 2 A slowdown in net flows was broad-based,with the notable exception of independent brokerdealers.Aswl

33、ooeoo st s etsfoowsobwsarobedabweedsotthsthes otbaleseexeptto soost eepe ee tsarokereeblerw.Netsfoowd,s%oo benneenen-oo-yenr cineet nssetsDeltverysmoeelw201721sbverbgeChb geds2022svws201721sbverbgedsperceetnne ponets2022 nrehousesNntnoeni/rennoeni brokerdeniersIedepeedeet brokerdeniersRennstered ner

34、estreet ndrnsersDnnntni-dnrect frrsPrnrnte bneks1Does eot neciude sererni srniier deinrery rodeis?en,bnek-oweed brokerdeniers,nesurnece-oweed brokerdeniers,bnek trust ned eoedeposntory trust corpnenes),whnch tonether nccouet oor npproxnrnteiy 10%oo totni nssets.Source:Ceruiin Assocnntes;pubinc finen

35、s;ccnesey enith nennereet SurreyMcKinsey&Company1.54.01.56.51.56.51.03.53.55.00.53.00.50.5+2.01.51.03.56US wealth management:Amid market turbulence,an industry converges Two other delivery models achieved above-industry net flows:independent brokerdealers and national/regional brokerdealers,at 3.5 p

36、ercent each,both buoyed by the continued movement of advisers to their models.Finally,wirehouses and private banks continued to underperform other delivery models(reporting net flows of 1 and 0.5 percent,respectively)in terms of industry average and their share of total client assets.At wirehouses,t

37、he underperformance was partly an outcome of productive advisers continued migration to independent channels.As in previous years,asset growth was concentrated among the top performers.The three fastest-growing wealth managers in absolute terms in 2022 represented one-fifth of total industry assets

38、but one-third of net flows.A similar dynamic was at play within each delivery model:the fastest-growing independent brokerdealer accounted for 50 percent of net flows for the model category(versus 33 percent of assets);the fastest-growing national full-service firm accounted for 70 percent of net fl

39、ows(versus 37 percent of assets);and the top-performing private bank represented the lions share of the channels growth.And a new McKinsey survey of leading RIAs with more than$10 billion in assets suggests that the difference in net flows between top and bottom quartiles is about seven percentage p

40、oints.A similar clustering of asset growth holds true at the adviser level,although the gap between top performers and the rest narrowed relative to 2021.The top quartile of advisers outperformed the second-highest quartile by two times in 2022(down from 2.5 times)and the bottom quartile by a factor

41、 of ten(down from 12 times).Within the top quartile,the top decile outperformed the next tier by a factor of 2(adding 26.8 and 13.5 new households per year,respectively).Positive operating leverage again,against the oddsIndustry profit pools increased for the ninth time in ten years,growing 8 percen

42、t to reach an all-time high of$65 billion.But 2022 was a slowdown compared with the 30 percent profit growth registered in 2021.Total revenues for the US wealth management industry grew 6 percent to$255 billion(Exhibit 3),and costs increased Exhibit 3 Overall US wealth management revenues grew 6 per

43、cent in 2022;most growth came from revenue streams related to net interest income.Overall US wealth management revenues grew 6 percent in 2022;most growth came from revenue streams related to net interest income.Revenue growth in 2022,US,%Mhanas froe 2021Share of growth from net interest income,%of

44、totalSourMs:Csrulli AnnoMiatsns InvestmentNewss publiM flinans Mcinnse Wsalth anaasesnt SurvseMcKinsey&CompanyIndustry averageWirshounsnNational/rsaional broksrdsalsrnIndspsndsnt broksrdsalsrnRsaintsrsd invsntesnt advinsrnPrivats bankn6286881002501?0?001?57US wealth management:Amid market turbulence

45、,an industry converges 4 percent to$190 billion(Exhibit 4).This positive operating leverage enabled the industry to expand its overall pretax margins to 26 percent(a one-percentage-point increase year over year).While this was the second straight year of positive operating leverage after five years

46、of flat margins(Exhibit 5),the dynamics in 2022 were markedly different from those in 2021.In 2021,positive operating leverage resulted from a combination of record net flows and near-record market appreciation;in 2022,rising interest rates fueled high-margin net interest income revenue streams.On t

47、he revenue side,revenue streams related to net interest income accounted for over 100 percent of industry-wide revenue growth in 2022,more than offsetting a decline in revenue streams tied to asset levels.These dynamics were observed across almost all delivery models,notwithstanding significant vari

48、ation in the details between models.The notable exception is RIAs,which were challenged by the worsenening macro environment and virtually no exposure to interest rates.They did,however,continue to see strong organic asset growth,driven in large part by Exhibit 4 Overall cost growth slowed in 2022,c

49、aused by slowing growth of client sales and service team costs.Overall cost growth slowed in 2022,caused by slowing growth of client sales and service team costs.Total wealth management1 costs,US,$billionCost growth,CAGR,%20Includes operating costs of wirehouses,national/regional wealth m

50、anagers;registered investment advisers;digital-direct channels;bank-owned,independent,and insurance wealth managers;and private banks.2Assuming that private banks are entirele salare and bonus(no compensable revenue).ource:Cerulli Associates;InvestmentNews;public flings;ccinsee ealth anagement urvee

51、McKinsey&Company202181316201?221?01261?0788079193825Client sales and service team arketingInvestment managementInformation technologe iddle and back o?ceCorporate functions2?0255526165813722Revenues,$billionOf which,compensable revenue,2$billionPretax proi

52、fts,$billionPretax proift margins,%8US wealth management:Amid market turbulence,an industry converges adviser movement into the RIA model and custodian referrals.Cost growth in 2022 slowed,growing at 5 percent versus the 7 percent average growth between 2016 and 2021(and 14 percent growth in 2021),p

53、rimarily due to the slower growth of client sales and service team costs,which represent two-thirds of total industry costs.In 2022,these costs grew only 3 percent,compared with the 9 percent per annum growth between 2016 and 2021.Client sales and service team compensation costs are largely tied to

54、compensable advisory and brokerage revenues,which in fact decreased by 1 percent in 2022.In contrast to most years over the past decade,the growth in revenues due to rising rates mostly benefited wealth management firms(rather than the advisers)hence the overall increase in profit margins.Given heal

55、thy revenue growth,the wealth management industry continued to invest in growth and infrastructure,as evidenced by the more significant cost increases in technology,middle-and back-office operations,marketing,and other support functions.Combined,these cost categories grew an average of 9 percent,ver

56、sus the 4 percent per annum average for 201621.While managers took a long-term through-cycle view and continued to invest in future growth and scalable infrastructure,interest rate hikes are unlikely to be sustained at the same Exhibit 5Rising interest rates helped the industry grow and achieve a se

57、cond straight year of positive operating leverage.Rising interest rates helped the industry grow and achieve a second straight year of positive operating leverage.Industry operating revenues,1$billionIndustry operating costs,2$billion1Includes revenues attributable to wealth management clientsprimar

58、ile advisore fees,trading commissions,mutual fund trailers,net interest income,and lending fees.2Costs represent total operational expenses excluding extraordinare items.ource:Cerulli Associates;InvestmentNews;public flings;ccinsee ealth anagement urveeMcKinsey&Company200220500

59、300200220501001502005%CA?14%CA?4%CA?1?%?CA?6%CA?Positive operating leveragePositive operating leverageFlatFlat9US wealth management:Amid market turbulence,an industry converges level for the long term,which would inevitably exhaust this source of high-margin revenue growth.Moreover,a decl

60、ine in rates(compared with 2023s historical highs)would be a significant headwind.Therefore,wealth managers should seriously consider continued investments in the business now,while conditions are favorable,to future-proof their business and operating models for tougher times ahead.1 The 7 percent g

61、rowth figure for 2022 cited here differs from the 6 percent cited earlier in the report because it includes growth figures only for wealth managers that report their performance publicly(i.e.,covers only a subset of the industry).The 6 percent figure covers the whole industry and is derived from bot

62、h public filings and the McKinsey Wealth Management Survey.2023:End of the easy ride?In 2023,the macroeconomic environment has shifted again,with a mixed impact on the industry.Our analysis of the performance of public wealth management firms in the first three quarters of 2023(on an annualized basi

63、s)suggests client assets have partially rebounded,growing by 8 percent compared with a 12 percent decline in 2022,whereas revenue growth has slowed from 7 percent to 4 percent(Exhibit 6).1 In other words,Exhibit 6Wealth managements revenue growth has slowed,but profi t margins shrank only slightly o

64、ver the fi rst nine months of 2023.Wemlth mmomgemeot aeveoue gaowth hm lowed,but paoft mmagio hamon ooly lightly ovea the fa t oioe mooth oo 02023Reveoue gaowth,%2022YTD 2023 ennuelizhn)Paoft mmagio,%05241613-141Beuhn on e uubuht oo tth innuutry ttet rhportu publicly enn tth dcKinuhy RIA

65、Bhnctrerning Survhy.Tth 7%innuutry growtt gurh oor 2022 niihru oror tth 6%cithn herlihr bhceuuh it inclunhu growtt gurhu only oor wheltt reneghru ttet rhport tthir phroorrench publicly ih,covhru only e uubuht oo tth innuutry).Tth 6%gurh covhru tth wtolh innuutry enn iu nhrivhn oror bott public lingu

66、 enn dcKinuhy Wheltt deneghrhnt Survhy.Sourch:dcKinuhy RIA Bhnctrerning Survhy.Inclunhu querthrly herningu enn nenciel uupplhrhntu oor Arhripriuh AAWd,Benn oo Arhrice GWId,BBY dhllon Wd,CI Finenciel US Wd,Enwern Jonhu,Golnren Sectu Wd,JP dorgen PB,LPL Finenciel,dorgen Stenlhy Wd,dorninguter Id,Bortt

67、hrn Truut Wd,Opphnthirhr Holningu PC,Reyronn Jerhu PCG,RBC US Wd,Silvhrcrhut Ad,Stiohl Finenciel GWd,UBS Wd Arhriceu,enn Whllu Fergo WIdMcKinsey&Company05217222736Iodu tay mveamge1WirhtouuhuBetionel/rhgionel bronhrnhelhruInnhphnnhnt bronhrnhelhruRhgiuthrhn invhutrhnt enviuhruPr

68、iveth bennu10US wealth management:Amid market turbulence,an industry converges the pendulum has swung back,with revenue drivers partially reversing from 2022:by mid-2023,public markets had almost recovered to peak 2021 levels(before sliding again),though due to the lagging nature of revenues versus

69、assets,the impact of the recovered asset levels has only been fully realized in the third quarter thus far.At the same time,for all but the independent and regional brokerdealers,growth in net interest income cooled because rate increases were smaller than in 2022 and advisers and clients allocated

70、away from relatively low-yielding bank deposits to higher-yielding offerings like CDs,treasury notes,and money market funds.At the same time,profit margins have decreased from 27 percent to 26 percent,primarily because of slower revenue growth.While the overall picture in the first three quarters of

71、 2023 has been largely favorable to wealth managers,dynamics differ across delivery models.Wirehouses reported 8 percent growth in client assets due to strong market performance,and revenues increased 1 percent,compared with a 4 percent increase in 2022.In fact,only one of the four wirehouses experi

72、enced positive revenue growth;the remaining three reported an average decline in revenues of 2 percent.The weaker revenue performance is due to lower fee-based revenues more broadly,which are affected by previous quarter-end balances,lower transactional revenues related to reduced client activity,an

73、d a slowdown in net flows,all of which were only partially offset by higher net interest income.While net interest income increased in absolute terms over 2022 on an annualized basis,all wirehouses reported declines in net interest income in their most recent quarterly reporting relative to Q4 2022,

74、due to the slower pace of rate hikes and the impact of“cash sorting”(client deposits dropped by 10 percent from the fourth quarter of 2022,and deposit balances fell another 3 percent in the third quarter of 2023).Pretax margins declined by three percentage points to 22 percent as costs grew by 5 per

75、cent.Private banks experienced 6 percent growth in client assets and 4 percent annualized revenue growth(compared with a 12 percent increase in 2022).Growth in net interest income,the main driver of revenue growth in 2022,tapered off as clients in this segment shifted toward higher-yielding liquidit

76、y solutions.Costs increased by 4 percent,resulting in a flat pretax profit margin of 36 percent.Independent brokerdealers grew assets by 9 percent,thanks to strong adviser recruitment by the largest firms and recent acquisitions of RIAs and smaller brokerdealers.Revenues grew at an annualized 13 per

77、cent rate(versus 12 percent for the same set of firms in 2022),the highest rate of all delivery models,due to a more than 100 percent increase in net interest income that carried over from 2022 from rising interest rates,favorable terms with partner banks,and volume growth across cash offerings.Unli

78、ke other delivery models,cash sorting has not been as much of a headwind because existing deposit volumes are much lower(on a per account basis)and smaller average client sizes likely are resulting in“stickier”deposits.We estimate that approximately 45 percent of independent While the overall pictur

79、e in 2023 has been largely favorable to wealth managers,dynamics differ across delivery models.11US wealth management:Amid market turbulence,an industry converges brokerdealer revenue growth in the first three quarters of 2023 has come from net interest income,compared with 70 percent in 2022.Finall

80、y,costs have grown by 7 percent,and as a result,profit margins for this segment have soared on a relative basis,the largest improvement among delivery models(a four-percentage-point increase,reaching 22 percent margins).Registered investment advisers grew assets by 9 percent,benefiting from adviser

81、movement into the channel,the steady pipeline of custodian referrals,and the emerging success of direct marketing by the largest RIAs.However,revenues were flat,compared with an 8 percent increase in 2022.Notably,RIAs have little to no interest rate exposure,which contributed to the lower revenue gr

82、owth versus independent and regional brokerdealers;it may also make them more resilient than other models to a lower-rate environment.National and regional brokerdealers grew assets by 6 percent and revenues by 7 percent on an annualized basis(similar to their 2022 performance),driven by strong net

83、flows from adviser recruitment and the continued growth in net interest income,which grew the second fastest,behind independent brokerdealers.In turn,costs grew by 7 percent,resulting in pretax profit margins of 17 percentthe same figure as the prior year.Overall,despite the macroeconomic uncertaint

84、ies,industry performance remains relatively strong in 2023,largely due to continued high interest rates and partially recovered capital markets.But wealth managers need to be clearheaded about the temporary nature of this reprieve and may want to invest now in preparation for a more challenging envi

85、ronment.And it is not just macroeconomics that will change.The long-established lines along which the industry is structured are evolving,and firms will face a new competitive paradigm.As always,structural shifts open up as many opportunities for striking out ahead of the pack as cracks in which lag

86、gards can stumble.12US wealth management:Amid market turbulence,an industry converges Amid a three-year span of unprecedented market volatility and macroeconomic shiftsrecord-high equity markets followed by the largest single-year decline in a decade and the fastest and highest interest rate hikes i

87、n historyit might be easy to overlook the acceleration of a more industry-specific trend:the convergence across traditional wealth management delivery models.This trend itselfa long-brewing response to client and adviser preferences and the need for diversification of revenue streamsis not“new news.

88、”Wealth managers have for some time been adding banking and lending services and trying to compete across a full range of client segments.And advisers have been converging around planning-led value propositions and adding services including insurance,tax preparation,and bill payment to make client r

89、elationships stickier.But thanks to the catalyzing impact of technology and the evolution of client and adviser needs,we are now on the cusp of this convergence solidifying into a new industry structure.After decades of convergence,many wealth management platforms are starting to look more like one

90、another,and the delivery channels based on business models(for example,wirehouses),affiliation(independent brokerdealers),type of relationship(RIA versus brokerage,advised versus self-directed),product focus(banking led versus investment led),and ownership(bank or insurance owned)are becoming less r

91、elevant.Ultimately,end clients are not very aware of the differences between delivery models,and they evaluate their advisers and wealth managers based on their direct experience.In response to evolving client and adviser needs and the continued march of technology,data,and analytics,wealth manageme

92、nt firms across delivery models have been converging across four axes.2 McKinsey Affluent and High-Net-Worth Consumer Insights Survey.The one-stop shopMore than ever,clients prefer one-stop-shop solutions for financial and other needs adjacent to wealth management.When we surveyed wealth clients in

93、2018,29 percent said they prefer holistic advice across adjacent needs;in our 2023 survey,the figure jumped to 47 percent,a 60 percent increase(Exhibit 7).The biggest growth in adjacent needs has been in lending and banking services:our survey indicates that approximately 30 percent of clients with$

94、1 million to$25 million in investable assets prefer to consolidate banking and wealth relationships(rather than keep them with separate institutions),an increase of approximately 250 percent since 2018.2 Younger investors are even more interested in a one-stop shop:more than 73 percent of clients be

95、tween the ages of 25 and 44 prefer to consolidate their wealth and banking relationships,up from 20 percent in 2018(Exhibit 8).Wealth managers have been responding.Wirehouses started integrating banking and lending solutions years ago,offering central asset accounts to serve as the funding center fo

96、r their clients investment,credit,lending,and debit needs.Several national and regional brokerdealers have followed suit,offering banking and lending,with some acquiring banking charters.From the other direction,banks have been trying to enhance their wealth management offerings to better serve thei

97、r deposit clients,and banks,custodians,turnkey asset management platforms(TAMPs),and fintechs are looking to innovate across banking solutions to provide white-labeled lending and cash management solutions for RIAs and brokerdealers.In addition,wealth managers are adding nonfinancial products and se

98、rvices such as trust administration,tax preparation,estate planning,and lifestyle management services(bill pay,for example)to their platforms.Some firms are outsourcing these adjacent services or offering them through strategic partnerships;others,RIAs in particular,Convergence is here13US wealth ma

99、nagement:Amid market turbulence,an industry converges Exhibit 7 Client preference for holisitic advice continue to increase,rising about 60 percent since 2018.Cbiensepreferenceeforehobiosiceadviceeconsinueoesoeincreaoe,erioingeaaouse60epercenseoincee2018.Reopondensoewhoepreferehobiosic advice,1e%of

100、respondentsWhaseoerviceoewoubdeyoueoredoeyouefnde oosevabuaabeeifeprovidedeayeyoureweabsheinosisusion?,e%of respondentsLegal servicesTax preparationLending and banking servicesHousehold saving and/or budgetingInsurance products and servicesPhilanthropic planningBusiness investment opportunitiesHealt

101、h and medical planningBill paying servicesOther concierge/lifestyle servicesReal estate advice and agents1Percent of respondents who indicate that they“prefer to work with an investment professional who can holistically answer my ifnancial needs across investments,life insurance,banking,and taxes.”S

102、ource:2023 McKinsey fAlfuent and High-Net-?orth Consumer Insights Survey(n=7,000)McKinsey&Company663201?202301020304050+60%2947have been acquiring tax practices,setting up trust administration,and building out concierge services to enhance their value propositions to clients.There is,of c

103、ourse,a defensive aspect to all of these moves:clients,or their heirs in case of intergenerational transfer,are less likely to go to a competitor for an adjacent service if they can easily add it to their existing relationship.In another sign of convergence,traditional adviser-led wealth managers ar

104、e offering digital-only options,while digital-direct firms are mirroring this approach and expanding their advisory services.The traditional firms are motivated by serving smaller clients profitably,attracting clients early in their wealth accumulation journey with the aspiration to serve them more

105、fully later on,and accommodating clients who simply like having a digital option alongside an adviser.For their part,digital-direct firms are building out advisory offerings to better monetize their existing relationships by providing higher value.Of course,providing a broader set of products and se

106、rvices increases operational complexity and cost to serve,but it creates clear value over the long run by enabling wealth managers and advisers to have primary relationships with their clients,which translates into five times greater share of wallet than for secondary relationships.In some cases,it

107、also enables greater retention of assets through the intergenerational wealth transfer(primarily through trust services and legacy planning),something advisers value.In addition,it helps diversify and expand revenue streams,primarily through net interest incomewhich has proved crucial for many wealt

108、h managers over the past year or so.14US wealth management:Amid market turbulence,an industry converges Come one,come all The second axis of convergence in US wealth management is the rise of multisegment platforms,whether segmented by client or adviser,as wealth managers seek to tap into wider asse

109、t and revenue pools.The trend holds across almost all delivery models(Exhibit 9).Consider a few examples:RIAs,historically focused on the core millionaire segment,are now expanding into the ultra-high-net-worth segment as most productive wirehouse advisers are starting to break away and start their

110、RIAs as better technology and investment content become more easily accessible.From 2016 to 2022,$10 millionplus relationships grew 13 percent annually in the RIA channel,versus 8 percent for wirehouses and private banks.Digital-direct firms are also moving upmarket,with double-digit growth similar

111、to that of RIAs in$10 millionplus relationships between 2016 and 2022,according to our estimates.Bank-owned wealth management firms(including wirehouses)are heading down-market,rolling out digital-only models to capture a large installed retail banking client base in lower-wealth segments.Regional a

112、nd independent brokerdealers are also competing to attract high-net-worth teams Exhibit 8Younger and,to a lesser extent,wealthier consumers increasingly prefer to consolidate banking and investing.Younger and,to a lesser extent,wealthier consurers increasingly prefer to consolidate anking and invest

113、ing.Agreerent with the staterent prefer to place investrents with a frr where also have a anking relationship,co ccnn ueSn nvesta le assets,$uillicnco Setail inventcSn pSeoeS tc ccnnclidate banking and wealti Selaticnniipn ccSSenpcnding tc an incSeane coSc Sce:2023 McKinney Af ent an

114、d digighetgtcSti Ccnn ueS rnnigitn S Svey yn n=0000McKinsey&Company6030602510252100.520.5WirehousesNational?regional brokerdealersIndependent brokerdealersRegistered investment advisersBank and insurance brokerdealersPrivate banksDigital-direct frms16US wealth management:Amid market turbulence,an in

115、dustry converges fastest-growing wealth managers have multiple affiliation models to appeal to a broad range of adviser preferences.Novel approaches to client acquisition The fastest-growing wealth management firms are taking a fresh look at client acquisition.The traditional approachesadviser recru

116、itment and M&A,adviser led,client referrals,centers of influenceare still part of the mix,supported by adviser training and practice management,but many firms are turning to centralized lead generation to boost organic growth,especially among the younger clients(Exhibit 10).Acquiring client assets t

117、hrough adviser recruitment or M&A is estimated to be the most expensive model,with a cost of acquisition typically between 250 to 300 basis pointsvarying widely depending on the size and quality of a specific book of business.Custodian referral programs seen in the RIA channel are another expensive

118、model,with an estimated acquisition cost of 200 basis points,although the costs are smoothed out over the lifetime of the relationship.Successful direct marketers have achieved acquisition costs as low as 80 to 150 basis points,but this requires strong execution.The most attractive acquisition model

119、 comes from privileged Exhibit 10 Referrals remain the largest source of new clients,but centralized lead generation is increasingly a major source.17US wealth management:Amid market turbulence,an industry converges access to prospects through the workplace,retail banking relationships,or self-direc

120、ted offerings.Firms with adjacent businesses that succeed at this cross-selling approach can achieve acquisition costs as low as ten to 20 basis points.In addition to their primary aim,wealth managers see these new acquisition channels as a differentiator in adviser recruitment.Consider that the ave

121、rage US wealth adviser is 50 years old and that 40 percent of total client assets are currently managed by advisers who are estimated to retire in the next decade.In this context,first-generation advisers continue to gather assets,improve their productivity,and seek opportunities to monetize their p

122、ractice before retirement.Junior advisers,in contrast,are hungry for access to proprietary leads and for support from wealth management firms to grow their business and find succession opportunities.Strategies are emerging in five distinct areas:1.Retirement and workplace.Wirehouses,independent brok

123、erdealers,and RIAs have made significant investments in the retirement segment by building new businesses or acquiring existing ones.Acquisitions have centered around employee stock option administration solutions,third-party administrators(TPAs),and retirement plan advisory practices.In that third

124、category,there were 74 acquisitions in 2022,compared with eight in 2017.3 Some are developing executive financial counseling offerings.From the other side,some recordkeepers are bolstering their retail offerings through acquisition and innovation,such as collective investment trusts and in-plan mana

125、ged accounts,to build wealth management relationships with clients outside of retirement plans.These firms are leveraging their privileged access to prospects through the workplace(and often employer endorsements)to gain trust and capture both in-and out-of-plan assets for acquisitions costs as low

126、as ten to 20 basis points.3 Margarida Correia,“Retirement plan adviser M&A off recent highs but still robust,”Pensions&Investments,July 14,2023.2.Affiliated self-directed businesses.Digital-direct firms and wealth managers with sizable self-directed businesses are setting up centralized lead generat

127、ion capabilities to transition self-directed clients into higher-value advisory relationships.The most successful firms have developed systems across people,processes,and tools to drive acquisition costs down to as low as 20 basis points.3.Retail banking clients.Bank-owned wealth managers,which have

128、 historically relied on in-branch referrals,are increasingly deploying sophisticated marketing techniques and analytics to increase top-of-funnel conversion.They are also actively blurring the lines between traditional banker and financial adviser roles and are introducing collaboration models to ma

129、ximize client experience.Successful bank-owned wealth managers are acquiring clients from retail banking relationships for between 20 and 70 basis points.4.Tax,insurance,and ancillary services providers.To better serve clients and gain privileged access to a new pool of prospects,independent brokerd

130、ealers and RIAs are acquiring firms that provide adjacent services.Recent acquisition examples include tax practices,insurance broker general agencies,trust administration service providers,and business management/CFO services companies.Although centers of influence with tax and insurance providers

131、have been a common practice for many years,these acquisitions are too early in their development to estimate their client acquisition costs.5.Direct-to-consumer marketing.Many wealth managers are now viewing direct-to-consumer marketing as a way to boost client acquisition,often starting with third-

132、party affiliate marketing services.For example,many fast-growing RIAs are looking to diversify away from the expensive custodian referrals by building proprietary direct marketing engines.When 18US wealth management:Amid market turbulence,an industry converges firms focus on a narrow target segment

133、with the right offer,the right marketing hook,and the right seller at the right time,acquisition costs can be as low as 70 to 80 basis points.Firms with multichannel client acquisition engines not only can lower their cost of customer acquisition and achieve greater organic growth,but also can enhan

134、ce their value proposition and use the access to proprietary leads as recruitment currency for advisers.Technology takes center stage Historically,traditional wealth management offerings relied almost solely on the clientadviser relationship,with technology considered a secondary path to success.But

135、 advances in technology,data,and analytics started boosting client and adviser expectations:clients were looking for highly personalized experiences seamlessly delivered across web,text,app,and video channels,and advisers began to expect seamless desktop experiences,client portals,and middle-and bac

136、k-office processes.In response,about two decades ago,wealth managers began investing significant resources in technology,and the trend is accelerating.In fact,spending on technology has outpaced revenue and cost growth of the industry over the past five years(9 percent versus 8 percent versus 7 perc

137、ent,respectively,from 2016 to 2021),with a big jump in 2022(19 percent year-over-year growth,versus 6 percent and 5 percent,respectively).Tech upgrades have spanned adviser desktops and tools,client portals,data feeds and integrations,cloud infrastructure,core tech modernization,and cybersecurity,am

138、ong others.Today,assembling a tech stack across in-house and vendor solutions to support higher productivity for advisers and better experience for clients is a core competency for wealth managers.In addition,fintech and WealthTech have become core enablers.The emergence of generative AI is likely t

139、o bring technology even further to the forefront of the wealth management model and to push client and adviser expectations even higher.While we do not see gen AI displacing the role of the adviser in the near future,it provides a once-in-a-generation opportunity for wealth managers to improve clien

140、t experience(in addition to other use cases across the value chain)and increase the productivity of advisers and other client-facing staff.In the latter category,gen AI is already being deployed to generate and synthesize meeting notes,draft financial plans and client briefs,support compliance repor

141、ting,and serve as a virtual assistant.According to McKinsey estimates,gen AI could help the average wealth adviser reorient 20 to 30 percent of their time toward growth-related tasks(Exhibit 11).The biggest time savings will come in preparation for client meetings,servicing of accounts,compliance,an

142、d financial planning.Unlocking this potential will require integration of gen AI into existing workflows and training programs for advisers and other client-facing staff.Wealth managers and advisers who capture gen AIs potential first are likely to significantly outperform the rest of the pack,at le

143、ast until the technology becomes more widely accessible and integrated across the industry.Generative AI is likely to bring technology even further to the forefront of the wealth management model.19US wealth management:Amid market turbulence,an industry converges Exhibit 11 Generative AI has potenti

144、al to significantly increase adviser productivity.Genecat ve AI has potent al to s gn fiantly nicease adv sec pcoduit v tyyVery highHighMediumLowN/A Relat ve amounts of t me spent/potent al t me saved?hace of adv sec t me spent on ait v ty,1%T me sav ngs potent al fcom gen AI,2%of adviser time spent

145、 on activity1Share of adviser time spent on activity:very high 20%;high=1020%;medium=510%;low 5%.2Estimated time saved by deploying gen AI:very high=4050%;high=3040%;medium=1030%;low 10%Source:Cerulli AssociatesMcKinsey&Company Client meetings?inancial planning/proposals Client service problems Prep

146、aring for client meetings Prospecting for new clients Investment research,due diligence,and monitoring Trading and rebalancing Managing day-to-day operations and administration Practice management Compliance Professional development activities Other Adv sec ait v ty aceaClient-facing activitiesInves

147、tment managementAdministrative and professional development Adv sec ait v t es20US wealth management:Amid market turbulence,an industry converges The past 18 months can be seen as a transition for the US wealth management industrya sharp departure from a decade of relatively easy and predictable gro

148、wth to a new,more challenging environment that will test each firms fundamental strengths.At the same time,wealth managers will be operating in a landscape shaped by new competitive dynamics as the distinctions between delivery models evaporate.Wealth managers can benefit from future-proofing their

149、strategies and deciding what big bets they want to make beyond business as usual.As we approach a definitive shift in the macro environment,US wealth firms are broadly in one of two positions:some benefited from rising interest rates and now have a unique opportunity to reinvest into their business

150、for the future,and others will face tough choices about where to pull back or pursue transformational change to free up capacity that can be redeployed toward long-term growth.Thriving in this environment will require a focus on strategic positioning,operating model design across the value chain,and

151、 development of a well-tuned“execution engine”to create forward momentum.Wealth managers can position themselves in the shifting landscape by focusing on the following six areas:1.Expanded offerings.Expanding the scope of advice and product offerings in response to evolving client needs will be cruc

152、ial;firms that do not keep up with evolving client needs and their desire to bank and invest in one place risk losing share to those that do.Wealth managers can pursue accretive impact by deciding where to lean in for their clients and acquire new capabilities,whether organically or via partnerships

153、.The right approach will depend on the wealth managers starting position and the needs of its client(and adviser)bases.2.Institutionalized lead generation system.Building and scaling centralized lead generation capabilities is a proven competitive advantage,yet few wealth managers have mastered it.W

154、hile putting in place and scaling such a system requires investment,the benefits are compelling.For example,the acquisition of a$1 million relationship can unlock$50,000 to$70,000 in advisory fees over a decade,suggesting that wealth managers should be willing to spend as much as$15,000 to$20,000 on

155、 client acquisition.Gaining exclusive access to a large installed client base(for example,workplace)can further decrease client acquisition costs.3.Adviser talent strategy.A competitive adviser talent attraction strategy is vital in the industry,especially in light of projections that the number of

156、advisers will remain flat(or,excluding RIAs,will decline by 1 percent per year)and the growing percentage of assets managed by advisers closing in on retirement.Near-term solutions include improving adviser productivity and enhancing the value propositionfor example,with succession solutions,technol

157、ogy,adviser compensation,paths to growth,or increased flexibility.At the same time,an innovative long-term approach to adviser development,compensation,and service models can attract new profiles of advisersincluding those new to the industry and from other roles in the industryto serve the next gen

158、eration of clients.4.Adviser productivity leveraging gen AI.Embedding gen AI capabilities into workflows can move the needle on productivity of advisers and other client-facing and supporting roles.For this reason and others,the technology has potential to separate winners from losers over the comin

159、g years.Success with gen AI calls Agenda for a new industry landscape21US wealth management:Amid market turbulence,an industry converges for investments in technology coupled with a focus on risk,compliance,and importantly,change management across the organization.We expect to see outperformance by

160、the firms that make the right big bets.5.Resource reallocation.With clarity on strategic priorities,firms should take a granular look at spend across the organization and realign it in support of the priorities.Such an endeavor puts resources behind highest-conviction growth priorities and is a thou

161、ghtful approach to cutting back on complexity.It often involves a realignment of incentives and KPIs to tailor them to various businesses operating at different speeds.6.Target operating model.The final priority is the firms operating model.Redesigning the operating model is an opportunity to embed

162、scalability and hardwire sources of competitive advantage.This includes creating a more flexible cost base that can adapt quickly to changing market conditions,as well as creating a culture that can be a force multiplier.Beneath the ups and downs that wealth managers have been experiencing lies sign

163、ificant opportunity.As the wealth management ecosystem undergoes a once-in-a-generation convergence,wealth managers of all sizes have an opportunity to reposition their franchises for a healthier future while broadening the ways in which they help clients and advisers meet their financial needs in a

164、n environment of greater uncertainty.Copyright 2024 McKinsey&Company.All rights reserved.John Euart is an associate partner in McKinseys New York office,where Jill Zucker is a senior partner;Jonathan Godsall is a senior partner in the Toronto office,and Vlad Golyk is a partner in the Southern California office.The authors wish to thank Fay Asimakopoulos,Kieran Bol,Victoria Fernandez,Cheryl Grover,Marten Hoekstra,Owen Jones,and Steven Lou for their contributions to this article.Scan Download PersonalizeFind more content like this on the McKinsey Insights App