Part 1 of 2


Wealth management is undergoing a significant shift. Increasing demand for new products and services, challenging market conditions and increased regulation are just some of the issues the industry is currently tackling. In addition, today’s wealth management clients expect high quality information and services tailored to them, on the channels of their choosing, 24/7.


In our recent webinar co-hosted with Acquia – which you can watch below – we discussed the challenges and trends facing the wealth management industry today. We’ve outlined some of the major issues the industry needs to address and offered some tips into how wealth managers can attract and retain customers in order to thrive in the digital age.


Broadly the industry is facing six challenges:


1. Growing demand for financial products

The global volume for net investable assets for high net worth individuals is going to increase by 25% over the next two years.


2. Changing prospect and client expectations

At the same time, whilst the desire to invest has grown, clients require more evidence before making a commitment. Many of the new generation are sceptical of authority, sensitive to risk, expect to be always on and seek social validation before they make any decision. No matter how much or little money they have to invest they always expect the best service.


3. A ‘changing of the guard’

The ties that traditionally bound incumbents to their clients are loosening and the field is opening for new relationships to be developed. It is expected that around $60tn will be passed on to the next generation in the next four decades. As historically around 90% of people change advisor when they inherit new wealth, this is a threat to incumbents.


This intergenerational transfer of wealth also coincides with the wealth management industry workforce aging and retiring – a third of the wealth management workforce will step down in the next 10 years.


4. Increased choice in investment

This new generation of investors is no longer limited to the same wealth management options. They can choose from platforms, crowdfunding, social investing, peer to peer investing, robo-advice, DIY – you name it, the options are there.


5. Challenging market conditions

Added to this, there are challenging marketing conditions. Over the last 10 years we’ve witnessed volatile markets, which have made it difficult for incumbents to prove their performance.


6. Increased regulation

At the same time regulation has increased, and so too has the need for transparency. This has meant wealth managers have had to increase their spend and effort on compliance, which has had implications for profit margins.


How the wealth management industry is responding

The industry is adopting a range of different tactics to combat these challenges, with the strategy either to grow their existing customer base by attracting new audiences, or being more targeted and efficient in their relationships with current clients.


Brand consolidation and acquisition

Almost a third of wealth management CEOs said they expect to merge or acquire new businesses in the coming year. 41% said they were seeking a strategic alliance or joint venture*.


Differentiation through hybrid wealth management models

Many wealth managers are moving into hybrid offers – combining traditional face to face advice with digital technology, to increase awareness, scale and offer the best of both worlds. Santander’s “Digital Advisor” is an example of this in practice, which has seen an increase in popularity over the last couple of months.


Offering robo-advice

Growth in this area has been so rapid that the sector has almost become commoditised. In fact in Singapore, Bambu now offers a white label robo-advice solution for any wealth manager who wants to try their hand at it. But the market is becoming saturated, and perhaps the only differentiator between these robo-advisors now is brand.


Offering more of a ‘retail’ customer experience

Although the jury is still out about whether robo-advice will last the course, the tools and tricks used by robo-advisors, especially in terms of customer experience, are increasingly filtering into other areas of investment management.


Traditional wealth managers have started to create landing pages, microsites and elevator pitches that are based around goals and returns, and they are backing up their business cases with social proof.


More attractive ownership models to remove sign-up barriers

One of the key customer barriers to working with a wealth manager is their high and unclear fees. This is changing with some of the new entrants within the space, such as Selma or Clear Minds, who are looking to reduce friction by introducing one, simple flat fee for their services.


Improved targeting, conversion and efficiency

Data is increasingly at the heart of efficiency and targeting strategies. It is becoming crucial that wealth managers track and record their client interactions, so that they can better understand their tolerance to risk and potential lifetime value. By appending social data to profiles, they can also determine their client’s personality, so they can recommend investments that are likely to resonate.


At the same time, that data is also being used to evaluate advisor and manager behaviours to help them become more efficient and effective.


RegTech investment

RegTech is becoming a necessity rather than a luxury, to efficiently keep abreast of regulatory thinking. RegTechs that provide anything from automated monitoring of disclosure requirements, through to regulation guidance using natural language processing to aid decision making, are becoming increasingly popular. Deloitte is currently following 263 discrete RegTech start-ups.


Investment in fintech start-ups

Whilst innovation is increasingly a hot topic, not every organisation can afford the time and the budget to invest in creating their own incubator.


To combat this the industry is clubbing together to pool investment. For example, the Investment Association’s VeloCity accelerator, founded in 2018, is a membership of FinTechs that supports a shortlisted cohort of 5-6 every few months to develop their ideas. Selected brands are mentored by individuals from the sponsoring asset and wealth management organisations.


Next week...

What does your customer really want? And how can a wealth manager's digital experience be enhanced to attract and retain more customers. Part two of this article will be online soon.