Why Wealth Managers are Accelerating their Front-Office Technology Spending

The front office is where wealth management firms can add the most differentiated value for clients. But differentiation is becoming increasingly difficult in a competitive market with rapid technological change.

In our new report, Wealth Management IT Spending Forecasts by Domain, 2023-2028, we explain how the front office – the advisor- and client-facing distribution functions of a firm – is the largest and fastest growing IT spending area for the wealth management industry.

The report breaks down wealth management IT spending by front-, middle-, and back-office business functions. The three fastest growing spending domains (furthest to the top on the y-axis in the chart below) are all located in the front office:

1. Digital channels
2. Onboarding
3. Client acquisition

The chart above shows forecasts for wealth management IT spending by domain over the next five years, informed by trends uncovered from our global survey of over 200 wealth management executives. Growth projections are shown on the y-axis, with the x-axis showing the market size in 2023. The bubble size shows the relative market size projected for the end of the forecast in 2028.

There are four key trends that explain why wealth management firms are allocating more spending on the front office:

1) Elevated customer expectations influenced by digital experiences

• 73% of wealth management firms agree that it is more challenging to win and retain customers than it was 12 months ago.

2) The need to streamline advisor productivity

• 65% of firms report that streamlining and automating advisor workflows is a core priority.

3) Increased competition from B2C fintechs

• 61% of firms believe the competitive threat from fintechs and other challengers is increasing.

4) Expansion of the mass-affluent client segment

• 59% of firms report that targeting the mass affluent and other under-represented communities is a key strategic priority.

In response to these trends, digital channels (customer-facing online brokerages, DIY platforms, hybrid advice, etc.) are clearly a high-spend, high-growth priority for wealth management firms. Digital channels are especially important for serving the growing mass-affluent client segment that skews younger.

Spending on onboarding technology (onboarding portals, new account opening, new client KYC/AML, etc.), which is projected to see the second-strongest growth over the next five years, will be driven by the need for workflow automation in new account opening. Digitizing onboarding improves a new client's first interaction with the firm and frees up the advisor to focus more time on client-facing activities.

For more insights, detailed spending breakdowns, regional forecasts, and complete definitions, Celent clients can read the full report here.