Skip to main content

In the first of a three-part series on digital transformation in wealth management, we examine how the role of digital in a changing industry landscape can optimise customer value.

Wealth managers are increasingly deciding whether the time has come to embark on meaningful digital transformations. Observing the industry and its future trajectory, a growing number of firms are expected to redefine their value propositions and supporting business models to become more customer-centric and deliver greater customer value. Wealth managers have historically differentiated on product set and quality of delivery, but firms for which customer value is the primary differentiator are likely to be 60% more profitable than their counterparts1. In this context, how can wealth management firms capitalise on the opportunity?

Leverage digital to enhance customer value

Organisations that improve their digital capabilities by focusing on the following battlegrounds are likely to gain a competitive advantage, driving client retention and revenue growth for many years to come.

Offer effective hybrid advice

Customers now want to build relationships with organisations that provide a mix of traditional human advice and innovative digital capabilities. Research shows that digital advisers are currently managing US$2-3 trillion of assets worldwide, predicted to rise to US$16 trillion by 2025 (three times the total AUM of BlackRock)2, so it’s clear that robo-advisers are here to stay. There are many benefits of robo, including self-serve and self-learn capabilities, real-time access to ‘DIY’ investment products and research, automated deal execution and flexibility with fee structures, enabling clients to pay for exactly what they choose.

Most customers will, however, continue to want to have a qualified financial adviser on hand. So striking the balance between ‘high tech’ and ‘high touch’ will be key for maintaining a compelling value proposition.

Simplify client journeys: less is more

A client journey in wealth spans front, middle and back-office interactions, each providing different services that make up the client-adviser relationship. Firms can use digital capabilities to integrate (and reduce the number of) traditionally disparate touchpoints, channels and technologies, resulting in a more simplified and value-add customer experience.

It’s important for firms to also consider how digital can address isolated pain points in a client journey, such as time taken to onboard investors. Research shows that over half (52%) of wealth managers surveyed were deeply concerned about client dropouts due to the pace of onboarding, with another 16% citing it as the top-level threat to business growth and client experience.3 Investing in digital onboarding workflow or document digitalisation tools should vastly reduce the time to complete laborious operational tasks, lowering the risk of client dropout and dissatisfaction.

Deliver personalised experiences

Personalisation in the wealth management space has traditionally been reactive and developed over a long period of time. Customers now expect firms to proactively anticipate their needs from the outset. Each client interaction across the value chain is an opportunity for firms to collect data points that digital tools can use to offer personalisation, for example, to offer tailored investment products, market insight and portfolio analysis. These differentiated ‘white-glove’ experiences will help develop a strong degree of client connectedness, empowerment and engagement that will form the basis of a meaningful client-adviser relationship.

Manage the changing customer demographic

We’re observing a growing democratisation trend in wealth, with new client segments entering the market. One recent example is higher earners that have saved money during the pandemic and are now looking to buy financial advice.

In future years, it’s predicted that a large percentage of the US$168 trillion in global wealth will be transferred from baby boomers to millennials and gen ‘X’ers4, many of whom have distinctly different customer preferences. Digital wealth services are essential, not only to deliver value for traditional (and often older) client segments, but also for the younger and new demographics. Younger customers expect to be engaged almost exclusively through digital channels with access to on-demand advice and a broader range of alternative investments that reflect their values, for example, in relation to environmental, social and governance factors. It’s safe to assume that tools offering transparency on a company’s ethical values will become a major differentiator.

Advisers can leverage the best client lifecycle management systems that use big data and analytics to better manage these demographic changes, and more easily build a holistic customer view to enable impactful prospecting and investor segmentation exercises. Using digital platforms will also generate cost efficiencies that lower the barrier for entry for non-traditional client segments. Firms that digitalise will generate a competitive advantage in building and maintaining customer relationships.

Unlock the value of data

Data is critical for success, particularly in the age of open banking. A plethora of opportunities exist for firms to use digital transformation to break down organisational data silos and generate individualised insights that advisers can use to deliver relevant advice, in the moment.

It’s important not to forget the human element of transformation in this context. Research by NewVantage Partners shows that organisations often fail to achieve transformational results (<30%) largely due to people, culture and leadership challenges (>90%*).5 Therefore it’s vital that wealth management firms are business-led, people-powered and needs-driven, to sustainably and pragmatically deliver client value and centricity.

In our next article, we will dive deeper into the specific use cases for digital transformation across the wealth management value chain and provide guidance on what firms can practically do to deliver greater customer value, while also driving down operational expenses.

Alex Cossor

As trusted transformation partners in the financial services sector, we can support your organisation to overcome complex change.

READ MORE FINANCIAL SERVICES INSIGHTS