B E A C O N S T R A T E G I E S, L L C // N E W S L E T T E R // JANUARY 2 0 2 1
Trends! Trends! Trends!
After the first couple of weeks of 2021, I was ready to return the year to its sender. Yet, as I sit here writing this, it's 5:15 pm, and the sun is just setting behind Lookout Mountain here in Denver. The days are getting longer, which is a trend. One that I like.
Talk soon!
Chip
Musing from the Beacon Team
RON FISKE
While the phrase “Annus Horribilis” has been around for quite some time, it was made more famous by Queen Elizabeth II, when she described the year 1991. For her, it was quite a year, with Windsor Castle burning down, Prince Charles and Diana separating, Prince Andrew and Sarah Ferguson divorcing, among other issues. Our “Horrible Year” was one that the world will soon not forget, with a once in a century pandemic ravaging the globe, bringing with it all sorts of dislocation and misery.
As we look ahead to 2021, we are more than glad to turn the page on 2020 while we are cautiously eyeing what 2021 may bring us. Here are some ideas that I have about potential outcomes within the Wealth Management industry for 2021:
The M&A trend that was observed within Wealth Management will continue to accelerate. This will be driven by any number of factors, including a lot of Private Equity and other investment vehicles within our space, including some recently launched SPACs. Other factors include the desire to develop liquidity for equity embedded within Wealth Management practices and a desire for greater profitability as costs like operational and compliance expenses can be allocated over a greater number of advisors.
2. FinTech Adoption
FinTech adoption will also greatly increase as advisors continue to see the benefit of greater automation. Whether it is e-signature, model portfolio construction, rebalancing software or any other of the myriad of FinTech capabilities, advisors will work to scale their practices and make them more efficient and able to deal with both clients and their offices remotely. This will force a greater migration to cloud based processing and the continued use of digital communication tools like Zoom and Microsoft Teams.
3. The Introspection
The introspection caused by 2020 will lead to a wave of both advisor and end-client retirements. Many people have seen family members suffer and die from this ongoing pandemic and, as a result, may have a different perspective about work and their lives. ♦
JERRY WACKERHAGEN
Recently we hosted a virtual roundtable with over 40 industry executives Here is what we heard from the group related to trends in managing vendor risks moving into 2021.
Firms today deal with thousands of vendors who themselves have contractors, partners, and suppliers. Risks can come from anywhere along this supply chain and most vendors do not or cannot guarantee the mitigation of these risks. 2021 will demand automation to perform due diligence and ongoing assessments.
2. Old Methods Do Now Work
The traditional approaches toward Vendor Risk Assessments are not working such as spreadsheets and paper documents. Automated tools are needed as table stakes for a comprehensive Vendor Risk Management Program. Some firms are using decentralized vendor monitoring systems which are time-intensive and cannot build to scale. Centralizing monitoring of vendors will be critical in 2021.
3. Regulatory Pressure
RegBI and the heightened scrutiny that comes with new regulations cause firms to be under increasing pressure from regulators to secure client data. Most firms report they suffer from a lack of policy awareness, adequate training, and staffing for their teams. Regulators are demanding more automated processes and ongoing repeatable assessment of vendors.
Overall, we hear from clients that vendor risks are becoming more complex and increasing in nature. Consolidating vendors into a critical few is a goal most firms have but have not implemented. Firms are looking for help in developing a robust program to manage vendors. ♦
ALAN GIANCATERNO
1. MarTech Rules
Marketing Automation technology continues its march towards widespread acceptance and usage in 2021. More and more firms have jumped on the MarTech wagon. The majority of CMOs are anticipating an increased marketing spend in 2021 and automation plays a pivotal role in their plans.
Tools like HubSpot, Marketo, Zoho, and others will become commonplace components of the tech stack at most firms. Even small firms will get in on the action due to MarTech’s ability to create instant scalability
2. Sales & Marketing Diversity
Diversity initiatives will help reshape the make-up of today’s Sales & Marketing teams. It is important for firms to mirror the clients they serve by displaying a commitment to hiring and developing key team members that bring a new level of diversity.
ESG isn’t just about investing. ESG represents a mindset focused on the Environment, Society, and Governance. Firms will need to incorporate ESG principles into their Sales & Marketing to display their commitment to clients and potential clients.
3. Tightening Regulatory Environment
All signs point to a further tightening of the regulatory environment in 2021. Wealth Management firms will have little margin for error; hence they will rely more heavily on RFIs and RFPs moving forward. Solution providers should be prepared to handle an increasing number of RFIs and RFPs as a routine part of their 2021 sales efforts. Failure to prepare will only further elongate the sales cycle.
Using technology to respond to these important requests expeditiously and accurately will become more commonplace. Consider participating in an industry repository where your RFI and RFP responses can be streamlined for future use.
4. Reign of the CFO
The Pandemic has strained the finances of many firms and placed an increased emphasis on fiscal responsibility in 2021. CFOs will take the reins at many firms or at a minimum become a more critical voice on new expenditures affecting the firm’s bottom-line.
Many firms will divest purchasing authority from individuals and move to a ‘decision by committee’ model for major purchases. This too will elongate sales cycles and make navigating the path to a favorable purchasing decision more complex for solution providers.
5. Competition Rises
Prepare to see more competition from new players in our space. Additionally, expect more ‘product creep’ and resulting overlap as existing solution providers expand their offerings in search of new revenue streams.
Subject matter expertise will be an important differentiator for Sales & Marketing teams. Marketers will need to be precise in their communications and demonstrate an intimate knowledge of their audience. Sales Reps will need to immerse themselves in detailed product specifications with an eye on compliance and solving problems for clients. ♦
MARSHALL LEVIN
The business landscape for both wealth management and wealth technology players will be re-shaped in 2021. A confluence of factors ranging from the maturation of technologies to the shift in the capitalization and ownership of wealth management and wealth tech firms have been catalyzed by changes wrought by the Covid-19 pandemic. The three trends that I believe are most significant:
technology portals/ecosystems
3. Strong brand creation by Independent B-Ds and RIA’s
The independent model has always had as its foundation freedom of advisor choice in product, technology and business model. Risk, regulatory and economic forces have and will continue to narrow these choices. This winnowing of choice is really an opportunity to create real brand differentiation by the coalescence around differentiated technology ecosystems combined with the creation of multiple business model platforms that support a wider choice of compensation/revenue sharing / ownership schemes for advisors. The continued growth in table stakes for firms and the growing industry investment by pure financial players, led by private equity, will make 2021 the year that distinct branding becomes a major trend providing greater “stickiness” for advisor relationships and establishing more tangible brand equity. ♦
BY BEACON STAFF
CHIP KISPERT
Omne Trium Perfectum
Out of a year of incredible adaptation along with enduring lots of hardship, human ingenuity is bringing forth some incredible pearls. In other words, there is light at the end of the tunnel. The following trends are my “omne trium perfectum” for 2021. My “3” are driven by the changes the pandemic has forced on all of us, and ultimately all have their tells in human behavior changes.
Industry Leaders' Perspectives
Salesforce Overlays
BY GUEST WRITER
ISHAN GIRDHAR, CEO, PRIVVA
Three Trends in Risk We See in the Enterprise Wealth Management Space
The Enterprise Wealth Management industry is faced with an unprecedented challenge of balancing growth, driven by a record stock market and growing number of individual accounts, and increasing levels of regulatory compliance and oversight from a cybersecurity and privacy perspective.
Three trends in risk we see in the enterprise wealth management space:
1. Board and management mindset shifted from “Are we compliant?” to “How are we compliant and what are we doing to stay compliant?” There are more eyes and ears on risk and compliance than ever before especially as we have shifted work to a work-from-home environment. As a result, the management team and Boards must be educated as they are now accountable for the organizations compliance. Ignorance is not an acceptable response anymore.
2. Vendor management went from nice to have to need to have. Driven by the increased reliance on technology to operate businesses, confidential and sensitive data is flowing to third party vendors hosted in the cloud increasing the need for third-party due diligence. As such, a formalized, structured vendor management program is critical to the protection of client and employee data and privacy.
3. Solar Winds is making sure firms have a full inventory of suppliers and updated contact information. Firms are ensuring a comprehensive list of suppliers and partners that service wealth management firms and appropriate contact information is up-to-date. Many firms were scrambling to identify all suppliers, not just IT related suppliers, to identify the impact of the SolarWinds breach on their external environments. I have never met Security, Risk, or Compliance teams that have extra time on their hands so finding trusted partners and technology to help is really important. We hate to be the bearer of bad news, but this is only getting worse. Don’t hate the messenger. Having said that, Privva and Beacon have designed a methodology and standard to put hours back in your day. ♦
SID YENAMANDRA, CEO & FOUNDER, ENTREDA
Cybersecurity Trends 2021
Cybersecurity is front and center for most organizations in 2021 given the WFH dynamic and the recent SolarWinds breach from nation state actors.
At Entreda, we see three important cybersecurity trends for 2021 in the wealth management industry:
1. Personalized, Security Awareness Training - There is a 65% increase in ransomware attacks against users in 2020 and therefore we see firms investing in more anti-ransomware solutions, end-point hygiene solutions and more context-aware and personalized security awareness training products for their employees, clients and contractors.
2. Updated Incident Reponse playbooks - Given that a significant percentage of the workforce is probably working from home (more so than before), we see that most organizations are having to revise their incident response plans to accommodate the work from home scenario. Additionally, organizations are investing in more table top incident response exercises to ensure disaster preparedness in case of a massive cyber attack and resulting data breach scenario.
3. Enhanced Data Privacy risk assessments - PII is everywhere and given the work from home paradigm, the data footprint has expanded even more which creates additional risk. Organizations are doing more data discovery and privacy exposure audits to identify where the PII data might be housed and increasing investments in data security for those specific areas or users. ♦
