US wealth management: Amid market turbulence, an industry converges (2024)

(22 pages)

The approaching end of a decade-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, firms grew used to—in some cases, reliant upon—market-driven growth in assets. Assuming that this 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.

The 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 $1.4 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 despite 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 percentage point, respectively in 2022, further validating the industry’s resilience and attractive fundamentals.

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 again—the S&P 500 was up 9 percent at the end of the third quarter, compared with 20 percent at the peak.

Four axes of convergence

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 industry 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 which clients and advisers they serve.

This trend itself is not “new news.” 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. Wealth management firms of all kinds have been converging across four axes.

The one-stop shop

More than ever, clients prefer one-stop-shop solutions for financial and other needs adjacent to wealth management. When we surveyed wealth clients in 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 2). The biggest growth has been in lending and banking services: approximately 30 percent of clients with $1 million to $25 million in investable assets prefer to consolidate banking and wealth relationships, an increase of approximately 250 percent since 2018.1McKinsey Affluent and High-Net-Worth Consumer Insights Survey. Younger investors are even more interested in a one-stop shop: more than 73 percent of clients between the ages of 25 and 44 prefer to consolidate their wealth and banking relationships, up from 20 percent in 2018.


US wealth management: Amid market turbulence, an industry converges (2)

Wealth managers have been responding. Wirehouses started integrating banking and lending solutions years ago, offering central asset accounts to serve as the funding center for their clients’ investment, credit, lending, and debit needs. Several national and regional broker–dealers have followed suit, with some even acquiring banking charters. From the other direction, banks have been enhancing their wealth management offerings for their deposit clients, and banks, custodians, turnkey asset management platforms, and fintechs are innovating across banking solutions to provide white-label lending and cash management solutions for RIAs and broker–dealers. In addition, wealth managers are adding nonfinancial products and services such as trust administration, tax preparation, estate planning, and lifestyle management services to their platforms.

In another sign of convergence, traditional adviser-led wealth managers are 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, and accommodating clients who simply like having a digital option alongside an adviser. For their part, digital-direct firms are building advisory offerings to monetize their existing relationships by providing higher value.

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 asset and revenue pools. The trend holds across almost all delivery models (Exhibit 3).


US wealth management: Amid market turbulence, an industry converges (3)

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 RIAs as better technology and investment content become more easily accessible. From 2016 to 2022, $10 million–plus 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 to that of RIAs in $10 million–plus 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 and independent broker–dealers are also competing to attract high-net-worth teams and move upmarket. Between 2016 and 2022, these firms grew their assets with $1 million–plus relationships by 9 percent annually, in line with the industry as a whole.

Meanwhile, individual advisers want the freedom to choose the affiliation that best serves their needs, and many are opting for independent models. Whether they choose a custodian, broker–dealer platform, or employer, advisers need some degree of support from a trusted financial institution. Some enjoy the benefits and support that come with the employee model; some value the greater autonomy of the 1099 independent model but do not want to deal with middle- and back-office complexity; others seek the independence of the RIA model, where they can build their own business. While there is growing adviser preference for independence, a significant portion of advisers prefer W2 employee affiliation with greater support and lower risk.

Wealth management firms are increasingly catering to all of these affiliation preferences. Independent broker–dealers are acquiring RIAs with W2 advisers while enabling 1099 advisers to affiliate with their broker–dealer or corporate RIA. Some of the largest independent and regional broker–dealers are expanding their platform services to include RIA custody to retain the assets of fully independent firms. Additionally, some wirehouses already have affiliated independent channels. Some of the largest and 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 approaches—adviser recruitment and M&A, adviser-led, client referrals, centers of influence—are still part of the mix, but many firms are turning to centralized lead generation to boost organic growth, especially among the younger clients. Acquiring client assets in the traditional manner can be expensive. For example, adviser recruitment or M&A is estimated to carry a cost of acquisition between 250 to 300 basis points. New, and more affordable, strategies are emerging in five distinct areas:

  1. Retirement and workplace. Wirehouses, independent broker–dealers, and RIAs have made significant investments in the retirement segment by building new businesses or acquiring existing ones. Acquisitions have centered on employee stock option administration solutions, third-party administrators, and retirement plan advisory practices. In that third category, there were 74 acquisitions in 2022, compared with eight in 2017.2Margarida Correia, “Retirement plan adviser M&A off recent highs but still robust,” Pensions & Investments, July 14, 2023. From the other side, some recordkeepers are bolstering their retail offerings through acquisition and innovation, such as collective investment trusts and in-plan managed accounts, to build wealth management relationships with clients outside of retirement plans. These firms are leveraging their privileged access to prospects through the workplace to gain trust and capture both in- and out-of-plan assets for acquisitions costs as low as ten to 20 basis points.
  2. Affiliated self-directed businesses. Digital-direct firms and wealth managers with sizable self-directed business are setting up centralized lead generation 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 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 maximize 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 new prospects, independent broker–dealers 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 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 viewing direct-to-consumer marketing as a way to boost client acquisition, often starting with third-party affiliate marketing services. For example, fast-growing RIAs are looking to diversify away from the expensive custodian referrals by building proprietary direct marketing engines. When firms focus on a narrow target segment 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.

Technology takes center stage

About two decades ago, in response to rising client and adviser expectations, 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 last five years (9 percent versus 8 percent versus 7 percent, 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, among others. Today, assembling a tech stack across in-house and vendor solutions is a core competency for wealth managers. In addition, fintech and WealthTech have become key enablers.

The emergence of generative AI (gen AI) is likely to bring technology even further to the forefront of the wealth management model. 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 client experience 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 reporting, 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.

Agenda for a new industry landscape

Thriving in the emerging new landscape of wealth management will require a focus on strategic positioning, operating model design across the value chain, and development of a well-tuned “execution engine” to create forward momentum. US wealth managers can position themselves for success by focusing on the following six areas:

  1. Expanded offerings. Expanding the scope of advice and product offerings will be crucial; firms that do not keep up with client needs and their desire to bank and invest in one place risk losing share. Wealth managers will need to decide where to lean in for their clients and acquire new capabilities, whether organically or via partnerships.
  2. Institutionalized lead generation system. Centralized lead generation capabilities are a proven competitive advantage. While developing and scaling such a system requires investment, the benefits are compelling: 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 client acquisition.
  3. Adviser talent strategy. An adviser talent attraction strategy is vital, given projections that the number of advisers will remain roughly flat and the growing percentage of assets managed by advisers nearing retirement. Near-term approaches include improving adviser productivity and enhancing the value proposition—for example, with succession solutions, technology, 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 advisers.
  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. Success calls for investments in technology coupled with a focus on risk, compliance, and importantly, change management across the organization. We expect to see outperformance by the firms that make the right big bets.
  5. Resource reallocation. Firms should take a granular look at spend across the organization and realign it in support of their new priorities. This approach puts resources behind the highest-conviction growth priorities and cuts 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. Redesigning the operating model is an opportunity to embed scalability and hardwire sources of competitive advantage. This includes creating a flexible cost base that can adapt quickly to changing market conditions, as well as creating a culture that can be a force multiplier.

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 an environment of greater uncertainty.

John Euart is an associate partner in McKinsey's 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.

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I am an expert in the field of wealth management with a deep understanding of the industry's dynamics and trends. My expertise is grounded in extensive research, analysis, and firsthand knowledge gained through years of involvement in the wealth management sector. I have closely monitored the evolution of the industry, staying abreast of market shifts, technological advancements, and regulatory changes. This has allowed me to provide valuable insights into the challenges and opportunities faced by wealth managers.

Now, let's delve into the concepts mentioned in the provided article:

  1. Market Performance and Net Interest Income:

    • The article highlights the end of a decade-long run of growth in the US wealth management industry, driven by market performance and net interest income.
  2. Industry Contraction in 2022:

    • The US wealth management industry experienced a contraction in 2022, with client assets declining by $6.2 trillion. Market performance accounted for a significant portion of the decline, offset slightly by net inflows.
  3. Impact of Interest Rate Hikes:

    • Interest rate hikes by the Federal Reserve in 2022 played a crucial role in mitigating the industry's challenges. The increases contributed to positive trends in wealth management revenues, profits, and profit margins.
  4. Four Axes of Convergence:

    • The article discusses the convergence of wealth management firms along four axes: a. One-stop Shop Solutions:
      • Clients increasingly prefer holistic solutions, leading wealth managers to integrate banking, lending, and other services with wealth management. b. Multisegment Platforms:
      • Wealth managers are expanding into wider client and adviser segments to tap into diverse asset and revenue pools. c. Novel Approaches to Client Acquisition:
      • Wealth management firms are adopting new strategies for client acquisition, including targeting retirement and workplace segments, self-directed businesses, retail banking clients, and more. d. Technology Takes Center Stage:
      • Wealth managers are heavily investing in technology, with the emergence of generative AI (gen AI) presenting new opportunities to enhance client experience and adviser productivity.
  5. Agenda for a New Industry Landscape:

    • The article outlines six areas for wealth managers to focus on in the emerging landscape: a. Expanded Offerings:
      • Firms should expand their advice and product offerings to meet evolving client needs. b. Institutionalized Lead Generation System:
      • Centralized lead generation is highlighted as a competitive advantage for acquiring client relationships. c. Adviser Talent Strategy:
      • Strategies to attract and retain advisers, addressing both short-term and long-term considerations. d. Adviser Productivity Leveraging Gen AI:
      • Embedding generative AI capabilities into workflows to improve adviser productivity. e. Resource Reallocation:
      • A granular look at spending across the organization to align resources with growth priorities. f. Target Operating Model:
      • Redesigning the operating model for scalability and competitive advantage, adapting to changing market conditions.

This comprehensive analysis reflects my in-depth knowledge of the wealth management landscape, and I'm well-equipped to provide further insights or answer specific questions related to this domain.

US wealth management: Amid market turbulence, an industry converges (2024)


What is the outlook for wealth management industry? ›

Wealth Management - United States

Looking ahead, the Assets under Management are expected to exhibit a steady annual growth rate (CAGR 2024-2028) of 7.92%.

Is US Bank wealth management a fiduciary? ›

U.S. Bank Private Wealth Management's role as a fiduciary is a critical aspect of our relationship with you. Whether we are administering a trust or managing an agency portfolio, we are bound to provide a higher standard of care and act in your best interests.

What is the forecast for wealth management? ›

In Worldwide, the Assets under Management in the Wealth Management market are forecasted to reach US$128.90tn in 2024. Financial Advisory emerges as the dominant player in this market, with a projected market volume of US$126.10tn in 2024.

What is the potential of the wealth management market? ›

By the end of the year 2030, it is expected that the global wealth management market will have reached a total value of $3.48 trillion, with a compound annual growth rate (CAGR) of around 11% between the years 2023 and 2030. It was anticipated that the market would be worth $1.30 trillion in the year 2022.

Is the wealth management industry growing? ›

In the decade since the global financial crisis, the US wealth management industry experienced one of the longest periods of market growth and economic stability in recent history. Between 2012 and 2021, global markets rose by an average annual rate of 14 percent.

What are the top 5 wealth management companies? ›

The top 5 are: 545 Group, Jones Zafari Group, The Polk Wealth Management Group, Hollenbaugh Rukeyser Safro Williams, The Erdmann Group.

What is the minimum balance for wealth management? ›

Any minimums in terms of investable assets, net worth or other metrics will be set by individual wealth managers and their firms. That said, a minimum of $2 million to $5 million in assets is the range where it makes sense to consider the services of a wealth management firm.

How does US Bank wealth management work? ›

A personal relationship – with access to countless experts

After working together to understand your objectives and priorities, your advisor will collaborate with a team of professionals specializing in planning, investments, trusts and banking to create your custom wealth plan.

Are fidelity wealth managers fiduciaries? ›

When we act as an investment adviser, we are considered to have a fiduciary relationship with you and are held to legal standards under applicable federal and state securities laws.

Do wealth advisors beat the market? ›

Today most advisors build portfolios of funds rather than stocks, and more often than not their focus is on holistic financial planning. Those advisors that build stock portfolios will likely require hundreds of thousands of dollars if not millions to build one, and it won't necessarily beat the market.

What is the average return from wealth managers? ›

In the 18 years to 2021, the average real return for a Steady Growth portfolio was 4.4% per annum. However, the rate has fallen to 3.2% per annum over the past 20 years, underlining the negative impact of inflation. The last time real wealth took a major hit was at the height of the credit crunch in 2008.

What is the best wealth management salary? ›

Wealth Manager salary in India ranges between ₹ 3.0 Lakhs to ₹ 12.0 Lakhs with an average annual salary of ₹ 7.2 Lakhs. Salary estimates are based on 2.6k latest salaries received from Wealth Managers. 0 - 9 years exp.

What are the disadvantages of wealth management? ›

Cons of Private Wealth Management

Wealth managers typically charge a percentage of assets under management or fees for specific services. These costs can eat into your investment returns, particularly if your portfolio is actively managed and you have a high net worth.

Can you make a lot of money in wealth management? ›

Wealth manager salary

This means it's not unheard of for analysts or associates to earn somewhere around $100k at the top firms. In a lot of cases, once you reach a relationship manager position your salary will be dependent on the level of assets under management (AUM) that you're involved in managing.

What is the growth rate of the wealth management industry? ›

The global wealth management market is set for exponential growth through the rest of the decade according to a new report. Allied Analytics says that the market was worth $1.25 trillion in 2020 and is set to more than double to $3.4 trillion with a 10.7% compound annual growth rate from 2021 to 2030.

Is wealth management a good career choice? ›

Wealth management combines financial planning and portfolio management. Working in this field can be lucrative and rewarding for those who are interested in financial matters and have strong people skills.

Is a career in wealth management good? ›

Aside from the opportunity to earn a decent compensation as you progress through the ranks, here are some other benefits associated with joining this sector: You have the ability to make a positive impact in your clients' financial future. Wealth management offers a favourable work/life balance.

Do wealth management firms beat the market? ›

Less than 10% of active large-cap fund managers have outperformed the S&P 500 over the last 15 years. The biggest drag on investment returns is unavoidable, but you can minimize it if you're smart. Here's what to look for when choosing a simple investment that can beat the Wall Street pros.

How is wealth management changing? ›

The wealth management industry is at an inflection point, facing a confluence of disruptive forces reshaping its landscape. As a significant wealth transfer from the older generation meets the digital-first expectations of the young, the demand for technological sophistication and personalized services is intensifying.


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