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To know if a wealth management firm will sink or swim in 2025, simply look at its technology. Firms with a robust technology strategy and implementation will flourish in a world where merger and acquisition (M&A) activity continues to climb, and organic growth rates stagnate.
A Quick 2024 Recap
In last year's report, F2 Strategy wrote “As the breakneck pace of aggregation continues, large firms will get larger and more formerly small firms will become household names. F2 Strategy predicts that the landscape of large national wealth firms ($100B+) will experience a dramatic shake up. These traditionally smaller firms will start to compete against the large firms that have always enjoyed brand presence and take a larger share of the market.”
This is exactly what has happened. Media reports declare 2024 to be a record setting year for RIA M&A, topping records set in 2022.
How Firms Can Come Out Ahead in 2025
Experts expect elevated levels of M&A to continue into early 2025 at a minimum.
“We predict this new crop of competitors in the $200-$400 billion range changes the game. They will put material pressure on incumbent national brands in 2025. Both groups will have to examine how they best leverage technology to develop client experiences and streamline day-to-day operations if they want to come out ahead,” said Doug Fritz, F2 Strategy Executive Chairman.
What Wealth Management’s Tech Leaders Say
F2 Research benchmarks WealthTech trends among leading firms. In 2024, it engaged CTOs, COOs, and CEOs at 160 RIAs, Wealth Managers, and Broker/Dealers representing more than $61 trillion in assets under management (AUM) in its assessments of the industry. The research identified areas of strength and gaps in technology adoption as it explored client experience design, marketing, CRM satisfaction, and digital client experience.
Upon reexamining 2024’s trends, F2 found a clear level of confusion exists among wealth management firms when determining how to measure and track client experiences. Lack of measurement is tied to the loss of new business, less referability, or missed opportunities to increase wallet share. This confusion leads firms to limit use of that data to develop deeper client relationships and grow business organically. As a result, they invest less than they should in important technology solutions that drive long term organic and inorganic growth.
Here is F2’s outlook on six of the trends that impacted the wealth management industry in 2024 and will be the foundation for firm growth and technology transformation in 2025:
Future Outlook: Most firms vastly underutilized input from clients. The downside? Designing client experiences based on the internal team’s opinions leads to misalignment between expectations and outcomes. Firms that have built successful client experiences have proven that not asking clients what they want is a bad approach; instead, they have engaged clients to develop the desired experiences and realized stronger growth. If firms continue this trend of not engaging clients in 2025, they will miss the mark in one of two ways: a highly skewed perspective of client needs or no investment in client experience at all.
Future Outlook: Marketing technology is an island separate from advisor or client experience technology. It requires separate strategies and technology solutions to ensure a higher level of integration. In 2025, organic growth will remain a focus area. To improve organic growth rates, firms must streamline the tools they use, improve the consistent use of marketing tools throughout the firm, add more marketing automation capabilities, and better define and measure marketing activities against brand value. If firms invest even half of what they do in inorganic growth in this area, they will be much farther ahead than they are today.
Future Outlook: Three benchmarks of CRM satisfaction have shown consistent frustration with this tool. The bright spot is a new finding: the benefit of integrations. The firms that have invested in more integrations (primarily operations and marketing) express the most satisfaction with their CRM. In 2025, more firms will hopefully develop a comprehensive technology strategy and outline ideal client and advisor workflows and implement the integrations that support them. The payoff is worth the effort.
Future Outlook: To date, the cross sell has not paid off and firms lack focus on organic growth. It is more evidence that wealth managers are not great at growing businesses. In 2025, this problem is likely to continue, fueling low organic growth rates. Firms could counter this trend by adding client touchpoints and improving the quality of those touchpoints.
Future Outlook: Why isn’t wealth management seeing the amount of technology progress it should? Wealth management firms cannot track value. Because they are not asking clients what they want, it is hard to track ROI. This trend will likely continue in 2025 because firms have not figured out how to engage with clients digitally. The separation between those doing an excellent job and those who have fumbled along the way will really start to show in firm growth rates and valuation.
Future Outlook: The fear of AI is subsiding. This year, AI has become a more tangible tool that supports daily workloads. The majority of AI use is coming through vendors as they add features to their solutions. In 2025, more real-world use cases will arise, particularly in the areas of personalized content and delivering insights in more efficient ways. These uses of AI may not be visible to the end client, but behind the scenes, the ability to deliver better content to clients more efficiently is a big opportunity for firms.
The data in this report is pulled from surveys conducted by F2 Strategy in 2024. The surveys include responses from 160 RIAs, Wealth Managers, and Broker/Dealers representing more than $61 trillion in assets under management (AUM).
