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Democratising wealth management through powerful new technologies

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This is a sponsored article from Avaloq.

Private banks and wealth managers are currently facing numerous challenges, but many of these can be summed up by the word ‘growth’. How best to grow in an increasingly competitive, cost-focused but still service-led market, in which digital technologies and data-driven business processes are creating new opportunities as well as fresh challenges?

To meet their growth ambitions, Avaloq firmly believes that wealth managers and private banks need to ‘democratise’ their service and product offerings to a wider audience of affluent clients. They need to do this to compete in a new, hyper-digital financial services market. Avaloq is determined to further invest in and develop a wide array of digital wealth solutions. One recent innovation is AvaloqEngageTM, an example of answering to the needs of wealth managers and private banks in how to engage with end-customers. In Asia the customers are open to digital solutions and it was logical that this solution was invented and designed in Asia.

It is only in the past few years — with the implementation of ever-more powerful technologies, deeper data analytics and ‘smarter’ processes — that this has become a reality.

By balancing industrialisation, innovation and individualisation, wealth managers and banks today are able to deliver truly personalised advice at scale, while addressing the specific needs of their clientele right across the wealth spectrum.

Used to superior, smart digital-first experiences

The key challenge for banks and wealth managers is that more and more clients, particularly younger market segments, are taking bespoke, predictive and impactful service and advice for granted. They are used to superior, smart digital-first experiences from Big Tech companies.

And as clients exhibit new demands that incumbents fail to keep up with, new players are gaining access to the industry. With lower barriers to entry, fintechs, neobanks as well as the tech giants are creating a fiercer competitive landscape — one to which existing financial players need to find adequate responses.

These challenges are putting the margins of financial institutions under pressure — not just on the surface, but also structurally. In addition to the rising costs incurred to extend and future-proof their offerings, banks are facing higher operating costs in response to a tightening regulatory agenda, accelerated by technological advances.

In parallel, low or even negative interest rates and the growing number of competitors are straining revenues and raising price sensitivity. Products and services that were once differentiators are now commodities.

Risk losing momentum and market share

As Avaloq outlined in detail in a recent White Paper1, if firms do not look at democratising their proposition, they risk losing momentum and market share, and will fail to capitalise on the digital-led transformation of the sector.

The opportunity lies in a new generation of tech-savvy, wealthy clients, with a high demand for seamless digital services. Rather than being an obstacle to growth, this generation presents a significant business opportunity for wealth managers that bring high-end wealth management services to the affluent segment.

To satisfy this demand for hyper-personalised services, traditional financial data needs to be combined with value-added data points like client life goals. We have already started to see services such as conversational banking, portfolio modelling, behaviour-based risk assessments and virtual assistants become key in supporting such value propositions.

Conversational banking, for instance, allows relationship managers and front-line wealth management staff to communicate with clients in a compliant manner through social and digital channels, such as WhatsApp. It has quickly become a major point of competitive differentiation for institutions eager to cater to a broader, usually younger, set of clients.

COVID-19 has strengthened the trend towards digital banking solutions while mobile communication between relation managers and their clients has increased significantly over the past months, particularly in Asia.

The affluent segment is predicted to accumulate further wealth

Global personal wealth is forecast to grow by around 5% by 2024. Even the more pessimistic models, which account for post-COVID-19 impacts, predict a rise in global wealth.

The affluent segment is predicted to accumulate more wealth and grow in numbers. This is a new growth opportunity, particularly for digital wealth advisory.

Wealth management is a highly profitable, very personalised business, where relationship and trust remain the key to success. But, as happened with many industries before, Avaloq believes that wealth management is on the brink of significant industrialisation.

Technological innovations are enabling wealth managers to serve a growing affluent segment efficiently, with a personalised service so far reserved only for (U)HNW individuals. For us, this exciting development will define the leading firms of the sector over the next decade.

1 Democratization of Wealth Management – a Unique Business Opportunity


This is a sponsored article from Avaloq.

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