Defining Digital Transformation in the Wealth Management Front Office

In an increasingly competitive industry, traditional wealth management firms need digital transformation to remain competitive. However, as we well know, “digital transformation” is often accused of being an overused buzzword; it is the ‘why’ behind the need for digital transform that is worthy of discussion.

One could argue that every industry, business and sector needs to not just embrace, but drive digital change throughout the organisation to remain relevant, but wealth management has lagged behind the curve. However, three major trends are beginning to force adoption at an increased pace: changing demographics, margin-squeeze in the face of FinTech incursions and changing regulations, and the increased pace of technological advancement itself.

The demography of high net worth individuals (HNWIs) is a major obstacle to change. The majority of HNWIs requiring wealth management services are 50 or older. And their decisions are largely uninfluenced by digital service quality. However, the rising generation of HENRYs (High Earners, Not Rich Yet) demand simplified digital experiences. And that means organisations must redevelop their services and go-to-market approach.

The vastly diverse levels of profit in the industry also drive change. While top quartile firms reap significant profits, lower margin firms are re-inventing themselves to survive. Success for these providers is being made ever more challenging, with the FinTech ecosystem fighting hard for a share of the market.

Regulatory change is an external factor that is set to challenge the status quo, with the inception of PSD2 in 2018. While PSD2 will mainly affect retail banking, the pressure on the ‘digital standard’ of personal and private banking will significantly increase, rippling through to the wealth management sector. In-time, it’s also likely that HNWIs will want to benefit from the aggregated account dashboards that PSD2 facilitates in order to manage their wealth.

With the continued investment in advanced analytics and AI, aggregating a HNWI’s wealth makes an attractive proposition for opportunistic FinTech firms. These challengers will drive incumbent firms to provide customers with a multi-channel experience. And facilitate access to portfolios through simpler UIs on both mobile and tablet channels.

The influence of artificial intelligence is also on the rise, Many providers have made significant investments in AI to aid decision making, but this technology is rarely white-labelled to customers to replace relationship managers. Both HNWIs and wealth managers are unlikely to demand the use of AI in this context for some time. The desire for a human relationship persists when significant personal assets are in question.

The relationship between a manager and a client requires collaboration, more so than any other financial product. The need to share information bilaterally means a constant exchange of documents. Traditionally, the answer has been paper — meet with a client, provide them with a physical portfolio update, collect relevant client documents, repeat. Collaborative technology eliminates the need for this paper exchange, and can strengthen the client relationship through more constant contact. And FinTech firms are very much aware of this.

For the foreseeable future, technologies that strengthen the client-advisor relationship through clearer communication, AI-driven insight, and collaborative platforms are likely to satisfy the needs of both existing HNWIs and rising HENRYs. For the incumbent firms, the challenge becomes digitalisation, and for adaptive FinTechs, the difficult task is to build trusting, human relationships with clients.

Box is cloud content management company that allows you to build custom mobile and web applications. We’ve helped wealth management firms digitally transform customer experience, allowing seamless collaboration on documentation and sensitive content on any device. For more information, view the presentation through the following link: http://pd.lnkd.in/eyly4fw