COVID-19 permanently changed the ways in which customers seek advice and how financial advisors dispense it. As customers and advisors alike have permanently adopted new ways of interacting in digital channels, new challenges will face wealth management firms in 2022.
Emerging out of the lockdown is a new asset class that is going mainstream. The number of crypto retail investors grew from 5 million in 2016 to 101 million in 2020, and 13% of Americans bought or traded crypto between June 2020 and June 2021 (by comparison, 24% traded stocks in that same period). We expect incumbent banks will start offering cryptocurrencies to compete with upstarts like Coinbase and Robinhood. We also view China’s ban on crypto as a temporary blip, as Chinese traders will find a way to trade and the operations of Chinese crypto companies will move overseas.
One appeal of crypto may be a response to mitigating another rising issue in 2022: inflation. A side effect of the rapid rebound following the pandemic is rising prices: The US consumer price index rose 5.4% in the past year, the highest inflation rate in 13 years — and American consumers currently expect prices to increase over the next year. Most financial advisors have never navigated this scenario, nor do they have the tools or the skills to advise clients on the challenges inflation presents. Incumbent firms will find themselves behind their competition if they fail to train their advisors on how to manage inflation.
Wealth techs that offer better, easier digital experiences will continue to push established wealth management firms to accelerate innovation to stay relevant to new and existing customers. Spurred on by Charles Schwab’s acquisition of Motif in 2020, JPMorgan Chase acquired Nutmeg and OpenInvest. Strategic acquisitions like these address talent weaknesses at incumbents, infusing know-how that can spark further innovation and enhancements. In 2022, we expect a growing technology gap will create more consolidation for incumbent wealth managers stuck in the middle.
There are many challenges ahead in financial services as digital acceleration reshapes the future of business, while the future of work has also permanently changed.
Read our full report to learn what else we’re predicting for 2022. For more details, look out for our wealth management predictions webinar on January 25, 2022, at 11 a.m. ET.