Wealth management is still among the least tech-savvy sectors in the financial services industry
- Although digital transformation in wealth management has been an important topic for a long time, its adoption is still relatively slow, according to experts.
- Even the digital transformation efforts of wealth management players are still very passive and many changes are needed to not be left behind.
As the world has seen an accelerated wave of digitalization of the global economy over the past decade, the wealth management industry has surprisingly lagged behind. Frankly, the nature of strong client relationships, brand heritage, and tightly regulated business practices made wealth management firms weather the early disruptions of technology. Unfortunately, we have now reached a tipping point and experts believe that wealth managers will either need to step up with their digital transformation or risk being left behind.
To be fair, the financial services industry globally has faced a renewed digital reality over the past decade where flexibility and convenience prevail. Perhaps the biggest lesson of the pandemic has been the viability of non-traditional business models in the financial services sector. Not only is it possible to provide personalized advice to clients via digital services like a wealth management client portal, but investors are increasingly showing their preferences for digital channels.
Therefore, according to experts, clients have started to pressure the current engagement model in wealth management, demanding greater personalization and efficiency, especially since Covid-19.
“I personally think the industry has not effectively embraced technology to the best of its ability,” Alvin Lee, head of wealth management at Maybank Group, told a panel discussion hosted by NEC Corporation of Malaysia. .
Lee added that when it comes to the wealth management segment, digital transformation journeys have been “more evolutionary than revolutionary.” He pointed out that with the right investment in innovation and digitization, wealth managers can not only improve efficiency through end-to-end automation and lean processes, but also future-proof their businesses by improving the points contacting customers and reviewing their value propositions.
Sharing similar sentiments, CEO of CIMB Investment Bank Bhd, Jefferi M. Hashim also noted that the wealth management industry is certainly not immune to the transformation and fluctuations in client expectations. “As in other industries, companies that embrace technology to adapt to change will be on the winning side,” he commented.
Another industry expert, Red Hat Director FSI Arwind Swami, also shared that wealth management firms cannot assume that length of experience, brand prestige, or even the quality of their relationships with their clients will insulate them from this possibility. Given that Generation Y is gaining economic powerArwin believes companies will woo a generation more immersed in technology.
Globally, in a Deloitte study based on 25 conversations with industry leaders in the APAC region, it is found that the wealth management business model has proven its resilience. However, stark differences in how APAC companies have handled the crisis have been noted. “Most wealth managers have applied a somewhat traditional approach, with many still working partially from the office and relying on conventional communication technologies,” he said.
By comparison, Deloitte noted that investment managers, fintechs and digital leaders, on the other hand, have primarily enabled location-independent ways of working through digital tools providing secure remote access to employees. The study also noted that a more digital front office will be a key requirement for wealth management firms.
“Most are prioritizing digitalization around customer onboarding, while leaders are also digitally supporting the traditional human elements of the customer lifecycle: prospecting and customer consulting. In the long term, wealth managers will benefit significantly from the efficiencies of increased digitalization, contributing to a much-needed increase in profitability,” the study notes.
What is certain is that overall, the Covid-19 pandemic hasn’t fundamentally changed the strategic imperatives of the industry, but experts believe it will further accelerate the difference between winning wealth managers who explore innovative business models, increase their operational agility and engage digitally with their clients – and other companies with a more reactive approach.