Incumbent Wealth Firms Must Boost Technology Capabilities to Innovate & Keep Pace with Investor Needs
Amit Choudhary, CFO, Capgemini Financial Services, 0
A shift in consumer preferences, a more financially literate client pool, and exacting demands from millennial investors are making technology tools ‘must-have’ assets in the wealth management(WM) industry today.
Traditionally, the wealth management(WM)industry has relied primarily on human touch and advisor insights to attract investors, build product options, and drive firm growth. Now, firm executives are realizing that a thoughtful technology plan is a future-proofing necessity, especially with the competitive challenges posed by the entry of BigTech into the industry.
In order to keep current investors happy while working to grow the business, WM firms are turning to WealthTech, a compatible joining of wealth and technology to produce digital solutions that enhance personal (and institutional) wealth management and investment. WealthTech firms are gaining ground by leveraging their digital acumen and agile work style to profitably redefine wealth business models. In fact, WealthTech game-changers such as robo advisors, micro-investment services, and digital brokerages are already making a transformational impact on the industry.
What has WealthTech got that incumbent firms need?
•Robo advisory:Based on digital platforms that provide automated, algorithm-driven financial planning services, robo advisors offer convenient and transparent online portfolio management of private assets. Noteworthy robo advisory firms include Betterment, Wealthfront and Scalable Capital. Robo tools can help traditional advisors reduce time spent on administrative tasks. There are now more than 200 robo advisor firms in the United States that offer some combination of investment management, retirement planning,and overall financial advice.
•Process Efficiency: The combination of fee competition, rising costs, and asset growth puts extreme pressure on wealth managers. Meanwhile, regulatory requirements are driving up costs in the traditional wealth business model. Therefore, firms must manage higher volume with fewer resources while ensuring optimal utilization making technical expertise a critical capability.
•Omnichannel Access: In today’s digital world, interactive anywhere, anytime, on any device content has become commonplace. So not surprisingly, savvy investors want real time and curated content that caters specifically to them. WM firms that are prepared to leverage omnichannel communication can improve client advisor relationships across all touchpoints.
•Customer Experience: Investors expect WM service on their terms, with a simple, transparent approach that is personal and relevant. More convenience through digital and mobile tools, omnichannel access, and wealth managers providing more clientfacing time will all enhance the customer experience.
Strengthening technology capabilities, embracing digital transformation & building a 360-degree customer view
As part of their future proofing strategies, wealth management firms are investing in technology capabilities such as cloud, robotics, artificial intelligence, data analytics, and integration of third party application programming interfaces (APIs).
Benefits of emerging technology in wealth management
Across the industry today, clients seek personalized offerings. Investors, especially millennials, are more tech savvy and looking for digital experiences similar to what they experience in other sectors. Only approximately 40 Percent of high net worth individuals (HNWIs)said they were satisfied with tailored offerings from their WM firms. According to Capgemini’s World Wealth Report 2019, the gap widened among younger populations with only 33 Percent of under-40 HNWIs reporting satisfaction, compared with 41 Percent of their counterparts over 60. This gap is possibly the result of the expectations of nextgen clients who grew up in an on-demand, personalized world where brands such as Netflix, Google, and Amazon set the bar. Realizing the environment has changed, many WM firms are focusing on client empowerment by adopting high-impact emerging technologies across the value chain. For example:
•Morgan Stanley recently offered its more than three million WM customers an encrypted platform through which they can store financial documents and share them with the bank more securely than via fax, email, or snail mail. The Digital Vault employs technology from Box Inc. a California online content management and file sharing service for enterprises. The new solution is a testament to Morgan Stanley’s confidence in shifting confidential records from in house servers to third party systems accessed online, or in the cloud.
•Deutsche Bank began leveraging robotic process automation in 2017 to manage repetitive tasks more efficiently. In areas where the bank integrated RPA software, 30 to 70 Percent of processes are now automated, and required employee training time has been reduced. Deutsche Bank has also deployed robo advisors and uses algorithms to personalize client portfolios.
To meet client demands for personalization, it is also essential for wealth management firms to build a 360-degree customer view to provide better services and aligned offerings across various stages of the customer’s life-cycle. As a result, account aggregation service solutions are becoming more popular. Here, clients can view their entire wealth portfolio across multiple banks financial institutions, and non-bank assets in a single place. Account aggregation will help wealth firms create new value propositions and enhance the service quality. With access to all of the assets and liabilities, advisors can also assess the riskiness of client’s exisiting portfolio.
Transformation begins with a digital strategy & systematic steps
Developing a sound technological approach requires working systematically through a series of steps. First, many emerging technologies should be woven into innovative new solutions to heighten digital sophistication in the physical world. New systems can help drive innovation, speed, and scale as firms prepare to become wealth managers of the future while continuing to provide personalized value and staying competitive in a dynamic industry. At the same time, firms must maintain their human element value proposition, and harness technology to enable its delivery.
Wealth management firms that are able to combine both technology capabilities and human interaction will stand out in the marketplace. By leveraging emerging technology solutions in scaling and defining new efficiencies, wealth managers can focus on their clients’ specific needs and better add value. With deep customer insights, wealth management firms can offer integrated offerings and increase the stickiness of clients for the bank, thereby improving the customer’s wallet share.
Across the industry today, clients seek personalized offerings. Investors, especially millennials, are more tech savvy and looking for digital experiences similar to what they experience in other sectors. Only approximately 40 Percent of high net worth individuals (HNWIs)said they were satisfied with tailored offerings from their WM firms. According to Capgemini’s World Wealth Report 2019, the gap widened among younger populations with only 33 Percent of under-40 HNWIs reporting satisfaction, compared with 41 Percent of their counterparts over 60. This gap is possibly the result of the expectations of nextgen clients who grew up in an on-demand, personalized world where brands such as Netflix, Google, and Amazon set the bar. Realizing the environment has changed, many WM firms are focusing on client empowerment by adopting high-impact emerging technologies across the value chain. For example:
•Morgan Stanley recently offered its more than three million WM customers an encrypted platform through which they can store financial documents and share them with the bank more securely than via fax, email, or snail mail. The Digital Vault employs technology from Box Inc. a California online content management and file sharing service for enterprises. The new solution is a testament to Morgan Stanley’s confidence in shifting confidential records from in house servers to third party systems accessed online, or in the cloud.
•Deutsche Bank began leveraging robotic process automation in 2017 to manage repetitive tasks more efficiently. In areas where the bank integrated RPA software, 30 to 70 Percent of processes are now automated, and required employee training time has been reduced. Deutsche Bank has also deployed robo advisors and uses algorithms to personalize client portfolios.
To meet client demands for personalization, it is also essential for wealth management firms to build a 360-degree customer view to provide better services and aligned offerings across various stages of the customer’s life-cycle. As a result, account aggregation service solutions are becoming more popular. Here, clients can view their entire wealth portfolio across multiple banks financial institutions, and non-bank assets in a single place. Account aggregation will help wealth firms create new value propositions and enhance the service quality. With access to all of the assets and liabilities, advisors can also assess the riskiness of client’s exisiting portfolio.
By leveraging emerging technology solutions in scaling and defining new efficiencies, wealth managers can focus on their clients’ specific needs and better add value
Transformation begins with a digital strategy & systematic steps
Developing a sound technological approach requires working systematically through a series of steps. First, many emerging technologies should be woven into innovative new solutions to heighten digital sophistication in the physical world. New systems can help drive innovation, speed, and scale as firms prepare to become wealth managers of the future while continuing to provide personalized value and staying competitive in a dynamic industry. At the same time, firms must maintain their human element value proposition, and harness technology to enable its delivery.
Wealth management firms that are able to combine both technology capabilities and human interaction will stand out in the marketplace. By leveraging emerging technology solutions in scaling and defining new efficiencies, wealth managers can focus on their clients’ specific needs and better add value. With deep customer insights, wealth management firms can offer integrated offerings and increase the stickiness of clients for the bank, thereby improving the customer’s wallet share.