Industry Outlook: Wealth Management Trends for 2025

As the year comes to a wrap, our thoughts pivot to what’s in store for the wealth management industry in 2025. One thing for sure is that change is the only constant. From market forces to demographics—below we highlight five major trends to watch for over the next year:

1. Increase in M&A activity

We expect wealth management M&A activity to increase from 2024 to 2025. According to DeVoe, the first three quarters of 2024 already saw 191 transactions, up from 185 during the same period last year. Lower interest rates, abundant dry powder, and a stabilizing macroeconomic environment will be conducive to more M&A activity, as sellers recalibrate their expectations and buyers gain more confidence.Consolidation pressures for wealth management firms remain: as fees in our industry face downward pressure, firms need to pursue scalability in order to remain competitive. Wealth management firms tend to generate stable cash, making them attractive targets for private equity firms. Additionally, an increasing number of larger independent RIAs are turning into aggregator platforms. Larger firms can afford to invest more in technology and distribution, and are an attractive option for smaller firms and independent advisors. Aggregator platforms provide the necessary infrastructure to service a multitude of advisor practices and client segments, centralizing core functions and streamlining operations while allowing generous degrees of autonomy for advisors to uniquely run their businesses.‍

2. Retail allocation to Alts

Alternative investments are one of the fastest growing investment product segments, with an expected CAGR of 9.7% over the next decade. This is no surprise, as these products create a compelling three-way value proposition across asset managers, wealth managers, and investors. For asset managers, alternatives bring higher profitability compared to traditional investments, which have seen their fees continuously compress in the face of low/no-cost index products. According to BCG, alternative assets represent only 21% of global AUM but account for a whopping 50% of global asset management revenue.For investors, alternatives can play an important role in portfolio construction, acting as a return enhancer, a diversifier, or sometimes even both. Simply put: combining traditional and alternative investments produces better outcomes from a total portfolio perspective.For wealth managers, alternative investments enable both differentiation and increased client engagement. Unlike traditional public markets, private assets and hedge fund strategies aren’t as easily accessible, and wealth managers generally need a certain level of sophistication to confidently allocate clients to these products. These skillsets translate into opportunities to demonstrate greater value, and to offer what other wealth managers may not. In fact, 83% of advisors believe that including alternative investments provides a competitive business advantage, differentiating their practice from peers.According to Mercer, 85% of advisors expect to increase client allocations to alternative investments. However, this is not as easy as one may think. Alternative investment products come with increased Know-Your-Client and suitability obligations, heavier paperwork in the onboarding and subscription process, complex cash management considerations, as well as a mishmash of liquidity schedules across different asset classes and strategies. For advisors to truly incorporate alternatives into their practice, a robust, next-generation portfolio management system is table stakes.

3. Bundling of wealth management services

“Holistic wealth” refers to the combination of investments, financial planning, tax advice, estate planning, insurance, and even banking—all offered under one roof. For clients, the value proposition of a one-stop-shop for all your wealth needs is pretty self-explanatory. Over the last five years, we’ve seen a 60% increase in the number of clients who prefer a holistic approach to wealth management. For advisors, on the other hand, offering holistic wealth management services comes with its challenges. Historically, wealth management has been nearly synonymous with investment management. Branching out into other services requires additional licensing and expertise, as well as the need for additional systems and tools, which are often sold separately as standalone products. Data aggregation and orchestration become key considerations because to be able to offer holistic wealth at scale, all the different tools and platforms need to be integrated and be able to talk to each other. After all, what’s the point of having a financial plan if one can’t track its progress in real-time?

4. Firms targeting the mass affluent

The mass affluent client segment continues to remain relatively underserved compared to the high-net-worth and ultra high-net-worth channels. “Mass affluent” refers to clients with approximately $100,000 to $3.5 million in investable assets. As we highlighted in a whitepaper earlier this year, mass affluent clients represent nearly half of the $42 trillion in investable wealth today. And yet, only 27% of wealth management firms actively pursue mass affluent prospects, who, on average, only represent 5-10% of a firm’s AUM. Attracting and servicing mass affluent clients requires an unique strategy of its own. High-net-worth clients often expect the premium white-glove experience, while low-touch robo-advisors have generally well-served the mass market. A successful strategy for mass affluent clients, on the other hand, requires the best of both worlds. While mass affluent clients have broadly similar products and services needs as a HNW client, both the client and advisor experiences must be digitally enabled to allow for a personalized yet scalable delivery.Firms should aim for a technology stack that is flexible enough to handle digital upgrades, continuous change, and varied interactions with external partners. In other words, the core technology stack itself should be built for change and configuration.

5. Increase in wealth being transferred

We’ll start by refreshing our readers with this often-quoted stat: by 2045, $84 trillion is expected to have been passed down from baby boomers to Gen X and millennials. This is a frequently discussed topic so we will try to limit our perspective to what really matters. Regardless of exactly how much wealth is being passed down and at what rate, the persona of the individuals that control wealth is changing. This means different priorities in savings and spending, different attitudes and values towards money in general, and ultimately different expectations toward how wealth management exists as one of the many consumer products and services in our everyday lives.Perhaps it’s stating the obvious to say that client preferences are always changing over time, but given the sheer amount of wealth at play, these particular generational changes pose significant materiality to our industry. This means wealth management firms really need to wake up and think about not just their current, but more importantly, future client base.According to Cerulli, less than one in five young investors plan to remain with their parents’ advisor because the advisor isn’t engaging them on their terms. For incumbent firms, the wealth transfer presents a challenge of retention, not growth. Utilizing a digitally-enabled, configurable wealth management platform is the only way that firms will be able to provide unique personalized experiences to each client, while maintaining scalability and operational efficiency.

What about AI?

This would not be an industry outlook piece if we didn’t talk about AI. Our long-term view is that we just simply can’t fathom the art of the possible. When the internet first emerged for example, it was dismissed by many. Today, it’s become the infrastructure of our modern society. Aside from leveraging large language models (LLMs) to scrub client data and using generative AI to create basic content, in 2025 we expect there will be a lot more talk about AI in wealth management than there will be action. Let’s also not forget that wealth management is one of the most heavily regulated industries, and innovation does not come without oversight.Wealth management is a people business, and we believe the greatest opportunities for the application of AI is in modelling and predicting human behavior. Imagine a tool that suggests a “next best action” for an advisor, based on what the AI has gathered about the unique behavior of their client. Of course for all this to work, we need to start by mining a ton of data, which is then used to train the AI. One of the biggest challenges of wealth management firms today is that most are still operating on disjointed legacy systems, which means data exists in silos. Not to mention, many firms still lack digital interfaces for their clients and advisors, which makes it nearly impossible to mine any data in the first place. Let’s start with baby steps.