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Adapt or die: The existential challenge of digitalisation facing today’s wealth managers

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This is a sponsored article from SS&C Advent.

Wealth managers face an existential threat. Confronted by intense and growing competition, fee compression, and shifting service expectations, they need to find ways to deliver an exceptional and differentiated client experience if they are to attract and retain assets. It will not be easy – but a strong digital presence will help them survive.

Knowing what clients want
Achieving a competitive advantage is all about client experience and adding value. The wealth management industry knows this better than most as its business model is predicated on giving dedicated, quality services to high net worth individuals. But the needs and expectations of their clients are changing in fundamental ways.

Personalisation still matters, as do face-to-face meetings, regular contact, and a guiding hand, particularly with more traditional client segments. But these capabilities in themselves are no longer enough. Today, no wealth management offering is complete without an intuitive and ever-expanding digital capability.

Embracing new realities
Historically, the wealth management industry has been slow to embrace new technologies. Today, it has little choice.

Digitalisation has become ubiquitous in many areas of people’s lives, and clients expect it to be no different in finance. If a client’s wealth manager cannot provide the easy-to-use, fingertip-ready services they want, there are other firms that will – especially with a new breed of digital-first fintech challengers entering the space. That is why many observers see low-cost fintech disruptors as an existential threat to wealth managers who are slow to modernise.

Demographics are adding to the imperative. The biggest wealth transfer in history is underway, producing a new generation of digital-native wealth holders who expect their managers to offer a powerful digital client experience that provides them with both convenience and customisation.

Managing fee pressure
Digitalisation is also the best hope wealth managers have of countering the impact of fee compression spreading through the industry and around the world.

Many wealth managers are looking to resist the downward fee pressures exerted by heightened transparency and competition. A number of firms even intend to ask clients to pay more over the next three years, although the majority aim to keep fees stable.

If firms are to justify maintaining or increasing their fees, it will be crucial for them to demonstrate that they provide sufficient value. The key to making that argument is enhancing service quality and the client experience through better reporting and richer, more useful self-service functionality—areas where a sophisticated digital offering can help.

Identifying organisational imperatives
Many industry participants still have a long way to go to create the sort of digital user experience clients expect and warrant the fees firm charge.

Few, if any firms, are currently as digitalised as they want to be. Many established players are falling behind on their digitalisation journeys, with some admitting they are still only at the start of the road.

Moving forward at the pace needed to develop a standout digital service requires an enterprise-wide commitment to transformational change that has to come from the top.

Ensuring projects are prioritised and receive the organisational support they need requires a determined and consistent C-level commitment. It also demands organisation-wide recognition that digitalisation is not a destination but an ongoing journey that needs sustained commitment and action.

Recognising digital limitations
While most firms recognise the importance of digitalisation and are launching mobile apps and richer website offerings to burnish their credentials, a slick digital front end will only get them so far.

A digital solution on top of flawed core systems, inefficient application programming interfaces, and poor data quality will not provide real value to clients or help business thrive in the long run. State-of-the-art apps or online services may boast world-class designs, but if they deliver inaccurate and outdated numbers, they are more likely to increase customer frustration and ramp up internal costs.

Finding the path to digital success
A powerful client experience – the kind that keeps customers happy, raises trust, and helps generate social media approval – is based on the total value your infrastructure delivers, not just the digital front end.

Digitalisation, therefore, has to be part of an overall business and technology strategy.

Advanced portfolio management and performance reporting systems, fed by quality data and tightly integrated with the digital user interface, will allow for accurate, personalised, and on-demand reporting. It will also enable advisors to create a more customised experience for each client—providing access anytime, anywhere from the client’s device of choice to their portfolio data and account information.

Mining client data to create personalised communications in real time shows clients their advisor is on top of the situation. In addition, it can be a powerful time-saver for internal client-facing teams.

Deploying the right tools
With technology-enabled experiences rapidly coming to the fore, employing the right infrastructure tools is crucial to wealth managers’ ability to differentiate their business.

Using industry-standard system components where possible—such as third-party portfolio management systems and data management solutions—can provide the tried and tested support infrastructure wealth managers need at the lowest total cost of ownership. Valuable functionality, along with proven scalability and operational efficiencies, are built into these packages. These considerations are important in the battle to combat fee and margin compression from rivals and new industry entrants.

The economics and firms’ operating flexibility can be further boosted by shifting to a cloud-delivered infrastructure.

Many wealth managers are switching to cloud services, and this trend is likely to continue. The rationale is clear: Why devote time and resources to hosting your own systems—an area that adds no meaningful value to clients—when you can tap into a resilient, functionality-rich platform that is managed by experts and always up to date?

Similar arguments apply to business process outsourcing, where wealth managers can benefit from greater processing control, expertise, and flexibility. And firms are already paying attention, with more than one third already engaged in it, and another half considering working this way.

Understanding the urgency of now
Achieving the right mix of solutions across the entire client servicing chain is vital if wealth managers are to deliver the sort of standout, client-driven capabilities they need to survive in today’s fiercely competitive landscape.

Incorporating a rich online and mobile-friendly digital platform into their offerings is an essential part of that client experience. By integrating clients’ data across multiple service channels, wealth management organisations will be well-placed to stay relevant to clients, attract new prospects, and raise their competitiveness. Their future survival and success demand nothing less.

This is a sponsored article from SS&C Advent.

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