Digitalisation of Wealth Management – a constantly changing scene

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The last few years have proved that the global wealth management industry weathered the global financial crisis relatively well, demonstrating to markets, regulators and clients that it has the skill, resilience and innovation not just to survive turmoil, but to build from it.

The Challenges
Wealth managers are well aware of the demands of their operating environment.

The pace at which interlinked forces are converging on the sector adds to the urgency to find effective, affordable and flexible solutions. Yet too often, organisations are locked into outdated structures and practices, delaying the adoption of changes required to deliver sustainable success, while the cost of doing so rises.

We argue that forward-thinking organisations need to understand the potential of digitalisation and use it to enhance customer loyalty and future-proof their business.

Start with the Client
Wealth managers often profess that everything they do is driven by their clients. But they too frequently retain service structures and business models which have stagnated while the needs and preferences of their target customers have changed.

Most managers will testify that the source of wealth has broadened considerably in the last two decades, from inherited fortunes to self-made money, from the West (mostly Europe and the US) to the East (notably Asia), and from the maturing Generation X to the younger Generation Y. Wealth management implies real-time, global reach and multiple channel service delivery.


Today’s wealthy are international and highly mobile, with diverse and complex relationship networks. However, evolving interactive technology empowers them to monitor or directly manage their multi-asset investment portfolios in any location and at any time.

Despite changes in some organisations, too often advice is dispensed from a formal office, obliging the client to travel to meet their relationship manager. Reporting is static and mechanistic, and perhaps outdated before it is even received.

Undoubtedly, some clients will always prefer traditional channels, and firms will have to make a judgement as to how they can continue to support them. A prestigious corporate address and a dedicated client relationship manager may remain a revered tradition, but today’s sophisticated client demands a richer overall experience. The future of wealth management belongs to a complementary but more responsive business model.

Industry Pressures
All wealth managers face the increasing business and product complexity and the rising cost of implementing and monitoring new regulations.

Managers can usually deal with scheduled regulatory changes, but the present environment of national, regional and international drafts, consultations, revisions, inconsistencies and interpretations of legislation presents more uncertainty than ever, and hikes compliance costs.

The operational and reputational risks related to outdated or unstable technology are compounding. While investment strategies, products and advice have traditionally formed a managers’ shop window, the rapid, effective responsiveness of both core and digitalised systems are a critical factor in risk management, and therefore always material for investors.

Such simultaneous, multi-faceted pressures are transformational. The only way firms will be able to deal with these is a step change towards digitalisation, deploying and consistently updating industrialised smart technology which improves core processes in a standardised, compliant and secure way.

In today’s volatile markets, wealth managers need a global, multi-channel, round-the-clock infrastructure which is built on flexible modular architecture with plug and play functionality.

Digitalisation
Digitalisation refers to the use of industrialised, smart technology designed to lift client service to a higher level. Far beyond automated straight through processing, which is a reactive post-order response, digitalisation aims to interact with the client where and how they prefer, with a full suite of personalised, real- time data, information and analytics.

It describes a way of doing business rather than a product or a delivery channel, and it acknowledges the changed reality of the wealth sector where target clients tap a range of information sources to compare goods, services and prices, but feel no particular loyalty to any one provider.

Digitalisation delivers a richer client experience, connecting and supporting the user, whether by video, tweet or text. Face-to- face engagement, so important to Generation X, is far less critical to Generation Y used to Facebook, LinkedIn or WhatsApp.

Intelligent mobile technologies offer great potential to leverage client relationships and streamline the overall business, yet take-up among wealth managers has been slow. Viral connectivity challenges established structures where control, sentiment and information are all traditionally centralised. In contrast, technology providers are delivering powerful but dispersed and collaborative interfaces through an expanding range of mobile applications.

Disruptive challengers
The pace of digitalisation and connectivity is increasing exponentially, opening up unprecedented reach to potential clients, wherever they are located, and across time zones.

The usual barriers of cost and time to build client networks are falling. New players are leveraging technology to reduce costs and deliver client-focused service on highly scalable, flexible platforms. Meanwhile, the social, peer-recommended element of digital technologies addresses many of the trust issues traditional finance channels still battle with.

Challengers to financial service providers may not even be from the finance sector. They may be industry-agnostic aggregators, who can offer increased transparency to consumers, innovators who meet client needs in new ways or dis-intermediators who target specific groups with enhanced interaction.

Wealth Managers’ Response
Wealth managers are not helpless in the face of these powerful forces. Many firms have proven effective at corporate innovations that drive efficiencies, maximise economies of scale, leverage powerful platforms or deploy technology to move up the value chain. Standardised business process outsourcing, including maintenance and updates, largely removes the need for costly in-house IT expertise.

Digitalisation is the next opportunity in the search for wealth management business. Creating and sustaining a powerful and secure digital front-end offering is where future competition and differentiation is focused. The benefits accrue not just to the clients, but to the company itself, where more mobile and interactive advisors are freed of routine tasks which have been automated.

The need for efficient back-office processing, which should also be leveraging feature-rich digitalisations in all its processes, is as strong as ever. At its best, such an operating model will be able to foster customer loyalty and boost brand awareness and value.


This is a sponsored article from ERI.

For more information, please contact:
Nicholas Hacking
+41 22 342 12 29
nicholas.hacking@gva-eri.ch