A combination of innovative new fintech solutions and traditional face to face advice is the key to opening up $10 trillion of US avers capital, according to a new study published today.

While many wealth firms use technology solutions—proprietary or third party—as a point of differentiation for investor and advisor acquisition, the true market opportunity for financial technology firms lies in the hands of 2,000 wealth management firms controlling roughly $10 trillion in assets under management.

Cerulli's latest report, State of U.S. Wealth Management Technology 2021: Aligning Firm Strategy with Technology Decisions.

The segment of the market most likely to license market-leading vendors consists of broker/dealers, registered investment advisors, and bank/trust firms looking to distinguish themselves to advisors and investors by controlling the client experience and building what they believe to be a best-in-breed tech stack, Cerulli said.

Tech

According to the research, three-quarters of these financial services firms state that their tech philosophy is to license market-leading vendors and to maximize integration between tools.

"There is a meaningful segment of firms that is seeking to leverage top external vendors while also optimizing integration," states Bing Waldert, managing director, US Research at Cerulli. "For many of these firms, their value proposition revolves around optimizing the advisor experience, in part through technology.

"Market-leading tools in categories such as performance reporting or financial planning should help the advisor create a better service experience for his or her clients," he adds. Portfolio accounting (75%), financial planning (58%), tax-optimization (56%) are the top-three applications licensed from external vendors by wealth managers, according to the research.

UHNW

For wealth managers working in the high-net-worth (HNW) and ultra-high-net worth (UHNW) segments, the complexity of more affluent clients dictates more specialized solutions. This will be most true in categories such as performance reporting and financial planning.

Performance reporting systems will need to support private investments that are not valued daily and often not held at mainstream custodians. Likewise, a firm might offer a standard offering, such as a homegrown goal and financial planning system, but still offer connectivity to other third-party solutions for more complex clients.