How AI, bonds and cybersecurity will impact financial advising in 2024

The regulations, technology and trends that will drive advisory success in 2024

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After the economic tumult of 2023, financial advisors are eager to move through 2024 as prepared as possible, ready to address any new challenge that may arise and to seize new opportunities that could drive business success.

The rise of technology, particularly generative artificial intelligence, will continue to be a talking point throughout 2024 as many leaders in wealth management are increasingly open to the idea of utilizing these tools in their own practices.

But with great innovation comes great risk, and in The Financial Industry Regulatory Authority's Annual Regulatory Oversight Report, cybersecurity, artificial intelligence and cryptocurrencies are named as top concerns and considerations for the industry. As new technology makes its mark on finance, Omer Meisel, the head of FINRA's national cause and financial crime detection program, notes that the industry has become the most targeted sector in cyber breaches.

"There's been an increase in the variety, frequency and sophistication of certain cybersecurity incidents, such as ransomware, cyberintrusions at critical vendors utilized by the financial industry, insider threats and impostor websites," Meisel said.

Still, Ornella Bergeron, FINRA senior vice president of member supervision, believes AI could be beneficial for every facet of wealth management, as long as firms proceed with caution while they test use cases and impact.

"So far, firms are being very cautious and being very thoughtful when considering the use of AI tools, as well as before deploying new technologies," Bergeron said. "So while for this year's report there was not a lot in the AI section by way of specific roles or observations, this is likely a topic we'll be seeing a lot more about in the future."

Rajat Deva, head of marketing at Savvy Wealth, echoes that technology will be a key part of finance this year, and has already noted advisors embracing AI tools to run automated, hyperpersonalized outbound marketing to prospective clients.

"Not only does the implementation of AI enable advisors to quickly identify the unique needs of prospects to use in their outbound messaging, but it also provides the potential for them to spend more time with actual clients while growing their practices intelligently," said Deva.

Beyond new tech tools, 2024 will see more provisions from retirement legislation Secure 2.0 come into effect, impacting both those saving for retirement and their employers. These new provisions address challenges many savers face in preparing for the future, taking particular aim at student loan debt. Under Secure 2.0, employers now have the ability to match a percentage of an employee's student loan payment and direct it into a retirement plan.

"For someone shouldering college debt, it can be a difficult decision around how to spend a given extra dollar when juggling both loans with retirement savings," said Mike Conrath, chief retirement strategist at JPMorgan Asset Management. "Student debt can negatively impact how much a worker saves and accumulates in their retirement nest egg. With the new matching provision in Secure 2.0, employers can set up their employees for success in tackling both goals while helping them build a more sound financial picture overall."

What else will define 2024 as advisors and firms work to leave the chaos of 2023 behind? Check out Financial Planning's latest reporting on the trends and regulations that will help drive success in 2024.

Betting on bonds in 2024

The bond market endured a historically terrible year in 2023. As the Federal Reserve repeatedly raised interest rates, bond yields — which are inversely related to bond prices — soared higher and higher. In October, the yield on a 10-year Treasury bond briefly hit 5% for the first time since 2007. Researchers at Bank of America called this period "the greatest bond bear market of all time" and referred to buying bonds as "the humiliation trade."

But the tides may be turning, as the Fed anticipates cutting interest rates three times in the latter half of 2024. "We think it's smart to give an eye toward bonds at this moment," Callie Cox, U.S. market analyst at eTorom recently told Nathan Place, retirement reporter at Financial Planning. "Given how strong stocks have performed this year, it could be time to rebalance your money a little bit — focus on bonds as a good cushion heading into next year."

Read more:

Could 2024 be the year of the bond?

Why FINRA fears new tech

FINRA's annual report on regulatory oversight highlights how technology has impacted the financial industry, and counts cybersecurity, cryptocurrencies, artificial intelligence and off-channel messages as growing concerns.

"The most heavily targeted industry now is the financial sector, having overtaken the health care sector," said Omer Meisel, the head of FINRA's national cause and financial crime detection program. "So from my perspective, the cyber threat remains one of, if not the top, threats to the financial industry."

Dan Shaw, reporter for Financial Planning, highlights the report and shares advice from Meisel and other industry experts on safeguarding your firm and client information.

Read more:

AI and 5 other FINRA worries for 2024

Secure 2.0 boosts retirement savings

Retirement legislation Secure 2.0 will continue to roll out new provisions this year that make 401(k) plans available to more employees, help to ease administrative burdens for plan sponsors and address financial challenges, such as student loans, that could affect an individual's ability to save for retirement.

"I'd encourage employers to lean on their partners for best practices around implementing the new provisions," said Mike Conrath, chief retirement strategist at JPMorgan Asset Management. "For employers who might have been reticent in the past about offering a workplace retirement plan due to costs, Secure 2.0 helps to remedy that issue."

Alyssa Place, editor-in-chief of Employee Benefit News, breaks down the Secure 2.0 provisions that take effect this year — and how employers and advisors can prepare.

Read more:

4 ways Secure 2.0 will impact retirement in 2024

Prepping for economic volatility and geopolitical upheaval

After a chaotic 2023, Financial Planning's parent company Arizent surveyed hundreds of wealth managers, asking about their outlook within the industry for 2024. Respondents provided answers that covered all aspects of the industry from regulation, technology and practice management, with top concerns including economic and geopolitical instability.

More importantly, advisors told us how they plan to handle it all. To survive the world's unpredictable nature, they plan to keep their own practices as stable as possible. From fee structures to client acquisition to working from home, wealth managers largely plan to keep the same strategies and priorities they had last year. To weather the storm, they'll stay the course.

Learn more about advisors' thoughts within the report here.

Read more:

What does 2024 have in store for wealth management? Arizent research offers 'Predictions'

What wealthtech leaders are watching

With the increased popularity of generative AI, 2023 was a pivotal year for wealthtech. Financial Planning recently spoke with seven wealthtech leaders for their opinions on their predictions for the industry this year.

Ryan Beach, president at Orion Wealth Management, said he believes direct indexing will continue to be a key conversation in wealthtech this year due to its appeal to investors seeking customization, tax efficiency and cost savings.

"This investment strategy allows individuals to own individual stocks or securities in an index, aligning their portfolios with unique financial goals and values, optimizing tax strategies and potentially reducing fees compared to traditional index funds or ETFs," said Beach.

Read more:

Insiders make their 2024 wealthtech predictions