The Digital Future of Wealth Management Firms


June 29, 2017

Wealth Management has become a client-driven industry, with advisors increasingly considered a value-add rather than irreplaceable gatekeeper. As wealth management firms vie to meet client demands, an emphasis on implementing the type of technology they are accustomed to has emerged. Wealth Management firms who wish to succeed and compete in the next five to 10 years will need to shift their processes to technology that more closely mirrors popular consumer technology.

According to PwC’s 2017 Global Fintech Survey,

“The Financial Services industry will be unrecognisable in five years…As younger generations enter the market they will expect the same level of service and innovation that they get from the American GAFA (Google, Apple, Facebook, Amazon). The question then that companies need to ask themselves is: what can I do to ensure that I am not caught at the back of the pack?”

The 1,300 financial services and Fintech executives responding to the survey largely agreed with PwC’s analysis. When wealth management leaders were asked to rank their priorities for customer retention in the near future, they answered:

  1. Ease of use, intuitive product design
  2. Cost
  3. 24/7 accessibility

Becoming easier to work with and creating intuitive digital products is the number one strategy that leading wealth management firms plan to employ to keep pace with other consumer-facing technology and ultimately retain customers. PwC breaks this down into three specific categories that firms can pursue to prepare for a future where technology is king:

  1. Increase in digital solutions that firms can integrate to improve operations
  2. Increased innovation in research tools and analytical capabilities to enable better investment decision-making
  3. Shift from technology-enabled human relationships to digital experience with human support

In order to develop a strategy for each of these three categories, traditional firms have key technology considerations before them.

1. Improving operations with digital solutions

Wealth Management has lagged behind the rest of financial services in terms of operational efficiency due to its over-reliance on manual, paper-based processes. While a hard-working advisor or administrative assistant may spare the client the majority of paperwork, the underlying problem remains the same; the client’s digital experience can’t rise above the level of administrative operations. Even if the client isn’t seeing it, paper-based processes cause massive bottlenecks that negatively affect the overall client experience.

Providing a complete digital experience begins with collecting, managing, and reusing data digitally. Manually entering client information into a CRM system is rarely sufficient, as CRMs often limit and paywall the level of data manipulation available.

The first step for any firm looking to build a digital DNA is not implementing a Robo Advisor. It’s tackling and digitalizing all the data collection, management and manipulation processes that occur when a new account is opened. These processes are collectively called ‘onboarding’, and making them paperless can affect a firm’s bottom line.

2. Increasing analytical capabilities for better decision-making

Once a digital foundation is in place, firms will find it much easier to make connections between data points they may never have had access to before, to better serve their clients. For example, this can take the form of intelligent product recommendations or internal analytics to improve upon existing operations.

Basic intelligent product recommendations can be pulled from software that matches stated client information and risk tolerance with the most suitable products. This process could even involve the client, creating a guided experience where the advisor walks the client through a digital platform showing the available products that match their preferences and life situation. On a more complex level, artificial intelligence or robotic processing automation enables advisors to automatically detect when a change in a client’s portfolio is necessary, based on a shift in the client’s life. The addition of a child, the child reaching a certain age, or a change of address can all signal the need for strategic changes.

Internally, a digital client onboarding platform can provide insight into every level of client account administration, allowing firms to optimize over time. For example, which advisors have the highest or lowest volume of client applications? At which point in the new account opening phase do clients most frequently drop off? What is the exact time it takes a client to complete the application process? This type of data isn’t available in a paper-based firm, and neither is the decision-making and optimization it allows.

3. Shifting to a digital experience with human support

Robo Advisors are not exclusively the future of Wealth Management, at least not yet. High-net worth individuals still prefer a human touch. Digital experiences are the way of the future, but they are best used guided by emotionally intelligent advisors who are able to provide wise and holistic advice to their clients.

The financial institution of the future will view itself as a technology company with human financial advisors providing support. This concept already reached the mainstream last year, with JPMorgan’s CFO going so far as to say they are not primarily a bank, but a technology company.

Go digital without the heavy lifting.

Most traditional firms don’t have the internal resources to develop digital tools themselves, and those that do often lack the experience of a specific segment that technology vendors can offer. Many firms are left to wonder if they should build, buy, or combine their digital tools. PwC’s report suggests the most effective way for wealth management firms to bring new solutions to market quickly is to partner with innovative Fintech companies. While traditional firms may not be familiar with what specific technology and trends are important to wealth clients, they can follow the lead of established Fintech companies who have done the necessary market analysis and product validation.

The firms that successfully make the transition from traditional to digital must partner with complementary Fintech companies, bridging the established client base with the right technology.

Our Digital Future

Gen X and Millennial investors are digitally savvy, and Gen Z behind them are even more connected. The future of wealth management depends on today’s firms making the shift from traditional to digital. To do so, firms must remove legacy processes that hinder insight and innovation and shift entire processes to match the constantly evolving digital expectations of today’s investors.

Looking to become a digital, paperless firm? Read our eBook for an overview strategy on how to get started.