Despite the global economy’s rapid adoption of digital technology over the last decade, the wealth management business has lagged behind. Firms have been able to withstand the early disruptions of technology because of strong customer connections, brand history, and strictly controlled business procedures. However, owing to the COVID-19 epidemic, a significant shift to remote working and increased acceptance of digital financial solutions has created a new opportunity for competitors to enter the market and disrupt the industry.
Clients are beginning to exert pressure on the present client interaction paradigm in wealth management, wanting greater customization and efficiency, as they face the new digital reality of flexibility and ease. Wealth managers are being challenged internally to tighten their operations and increase productivity in the face of diminishing earnings and growing regulations, in addition to handling shifting consumer expectations.
So, how can incumbents address these issues and prosper in the new hybrid advice era? In this article, we’ll look at five digital tactics that wealth managers may use to stay competitive and expand in 2022.
Why have wealth managers been so resistant to digital transformation?
The conventional wealth management business model relies significantly on many manual procedures and in-person client contacts, and it is focused on creating close personal connections. This, combined with the ever-increasing regulatory load, has caused wealth managers to reject digitalization.
However, because of this inertia, a new generation of digital wealth management companies has entered the market to fill any product gaps.
“There’s a market sector dubbed ‘$100,000 to $1 million,’ and technology has opened up that space,” says Ian Woodhouse, Head of Strategy and Change at Orbium, which is part of Accenture Wealth Management.
The key drivers of wealth management’s digital transformation
A slew of digital rivals has come up to investigate the financial management industry’s rising prospect for innovation. Robinhood and e-Toro are two of the most popular, providing ordinary investors with access to global stock markets without the normal high management costs imposed by brokers and traditional asset managers. Acorn and Stash, on the other hand, allow customers to save money and invest it automatically. According to Statista, the so-called ‘Robo advisers,’ who give automated investing advice online, expanded their assets under management (AUM) to $827 billion in 2019.
Competition – Digital wealth providers are posing a threat to the traditional wealth management paradigm by providing more personalized and efficient digital services that meet shifting customer expectations.
Client expectations are shifting – Customers are growing more technologically sophisticated, and they want a seamless, personalized, and convenient user experience from all of their service providers. Clients’ requests for more open and timely information about their assets and investments have been fuel by market swings and the absence of effective communications with advisers during the epidemic.
Technology maturity — The world is moving toward a digital-first environment, and the COVID-19 epidemic has only hastened this tendency. Organisations all over the world are increasingly under pressure to digitally transform their operations and increase efficiency while remaining resilient in the face of change and possible economic challenges.
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