Wealth and Asset Management Update: Four Trends Reshaping the Market

The strongest asset and wealth management firms will combine technology, infrastructure and diversified investment offerings to deliver more comprehensive advice and strengthen the client relationship.

AI-enabled advisory services, broader access to alternatives, personalized portfolios and more comprehensive wealth management offerings are reshaping competition and driving innovation across wealth and asset management. Below, we outline four key developments and how we believe they will influence the wealth and asset management ecosystem.

AI as an enhancer for advisors

AI has moved from experimentation into everyday workflows. Firms are embedding AI into processes such as investment research, portfolio construction, compliance and client service. According to EY-Parthenon, 95% of asset and wealth managers report at least three AI use cases today.¹

Rather than a replacement to the financial advisor, AI can help strengthen the advisor-client relationship. The advent of robo-advisors experienced a similar dynamic: what began as a perceived threat to human advice evolved into a primarily B2B model whereby the technology platforms partnered with advisors to help deliver effective advice.

In addition, incumbent technology solutions are well positioned to capture the opportunity presented by AI given existing client relationships, distribution and compliance know-how. Analyzing portfolios, drafting proposals and automating documentation and related workflows can all become faster with AI, allowing advisors to spend more time on high-touch conversations and tasks where judgment, transparency and fiduciary standards matter most to their clients.

Case in point: LLR portfolio company YCharts recently launched their proprietary AI agent, “Y”. Y executes research, investment analysis, proposal generation and client communication tasks from a single prompt, leveraging YCharts’ institutional data and existing tools, while incorporating compliance guardrails, customizable disclosure language and 16 years of domain expertise into agent-assisted workflows.

Changes to the regulatory landscape, new fund structures, lower investment minimums and technology-enabled distribution have opened the door to greater participation from retail investors.

Alternative investments move into the mainstream

Private equity, venture capital and other alternative investment opportunities were historically reserved for institutional and ultra-high-net-worth investors. Changes to the regulatory landscape, new fund structures, lower investment minimums and technology-enabled distribution have since opened the door to greater participation from retail investors. According to BNY, private-wealth alternatives AUM is expected to triple over the coming decade to approximately $12 trillion, up from roughly $4 trillion today, and 84% of wealth managers expect alternatives allocations to rise in the next 12 months.²

Greater availability alone is not driving adoption. Investors turn to alternatives when seeking diversification beyond public markets, and potentially higher income and lower volatility in environments marked by inflation and instability. In the U.S., 87% of companies with >$100 million in revenue are private, and without access to these businesses, the retail community could be missing out on a significant asset class.³

As access expands, advisors will need to fit alternatives into clients’ broader financial-planning profile. This creates opportunities across distribution, model portfolios, diligence, data and middle- and back-office infrastructure. The wealth landscape includes a growing group of retail-alternatives distribution and operations platforms, and we expect many more on the horizon.

Case in point: LLR portfolio company Soltis Investment Advisors (“Soltis”) built a dedicated alternative investment practice to evaluate and incorporate alternative investments into diversified client investment strategies. In addition, YCharts is helping advisors analyze and communicate proposed allocations more effectively through private-market benchmarking, fund-level alternatives data and other advisor resources to assess portfolio-level risk and performance of alternatives alongside traditional public-market investments.

We expect the next evolution to be “mass personalization” at scale, whereby advisors can tailor model portfolios to an investor’s tax situation, risk preferences and more…

Continued shift toward mass personalization

Mutual funds and ETFs introduced the ability to track strategies in a diversified portfolio at a low cost. Today, ETFs represent more than $13 trillion in global assets, up from about $1 trillion in 2009.⁴

We expect the next evolution to be “mass personalization” at scale, whereby advisors can tailor model portfolios to an investor’s tax situation, risk preferences, strategic objectives, liquidity needs and/or concentrated exposures. This is enabled by technologies that support direct indexing, fractional shares, and tax optimization. According to Cerulli Associates, the U.S. direct indexing market is expected to grow to more than $800 billion by 2026, up from $460 billion in 2022.⁵

This shift affects both wealth and asset managers as demand for solutions that enable mass customization of portfolio strategies continues to grow. Platforms that make this available, and operationally effective, to advisors at scale should succeed.

Case in point: BNY’s 2024 acquisition of former LLR portfolio company Archer (see press release here) demonstrates the growth in managed accounts offerings and the need for middle and back-office infrastructure to support personalized investment products at scale.

Expansion of advisor value proposition

Clients increasingly expect advisors to address more than investment performance through integrated financial planning that incorporates tax / estate / retirement planning, insurance and business-owner and charitable planning. This move towards comprehensive planning has been a defining feature in the independent RIA channel. From 2016 to 2022, RIA assets grew at an approximately 12% compound annual rate, outpacing wirehouses and broker-dealers.⁶

Broader service offerings can deepen relationships, improve retention and support organic growth. It also requires more expertise, integrated technology and greater operating capacity. These demands help explain why scale and strategic M&A remain central themes in the RIA market.

Case in point: LLR portfolio company Soltis has completed three acquisitions since LLR invested in the Company in 2024, including: High End Financial, which added $500M in AUM and experienced advisor talent, GDM Private Financial Solutions, which added in-house tax preparation and planning capabilities, and Artifex Financial Group, which added $325M in AUM and geographic expansion. Together, these acquisitions support Soltis’ development of a scaled, national platform with a comprehensive wealth management offering.

Here’s the bottom line.

The wealth and asset management market remains large, fragmented and positioned for growth and consolidation. The strongest asset and wealth management firms will combine technology, infrastructure and diversified investment offerings to deliver more comprehensive advice and strengthen the client relationship.

LLR continues to invest in software that equips wealth and asset managers with better tools and services that combine trusted relationships with the capabilities required to serve clients more comprehensively.

Learn more about the LLR team, relevant investments and our focus on wealth and asset management.

Disclaimer:

The information presented in this article is solely intended for an audience of potential LLR portfolio companies and is not the offering or marketing of any LLR Fund or Fund portfolio company. Named LLR investments presented herein do not reflect a complete list of LLR investments and are provided for informational purposes only. The information shown in this article represent the views of the author and LLR. Reasonable persons may disagree as to perceptions of the current market environment and the investment opportunities created thereby.  The statements, opinions, and data expressed in this article are subject to change without notice. Past Performance is not a guarantee of future results.