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How digitalization is changing wealth management

Bobby Bok
Bobby Bok
Head of Wealth Management Solutions, North Asia

The emphasis on technology and use of mobile channels in Asia’s wealth management industry is best illustrated in China, where there has been an unprecedented and rapid generational transfer of wealth.

As a result, its high net worth individuals are often young and very tech savvy. And in a society where much of their interaction and discourse occurs online, they can conduct nearly every transaction via their smartphones.

They also want access to comprehensive, up-to-date financial market information and analytics delivered as a multi-channel digital experience.

Together with the widespread use of social media, the preferences of these Rewired Investors have changed the way firms look at customer retention.

People look at the skyline of the central business district from the Skybridge of The Pinnacles at Duxton public housing estate in Singapore April 25, 2013. Banks in Singapore are urgently scrutinising their account holders as an imminent deadline on stricter tax evasion measures forces them to decide whether to send some of their wealthiest clients packing. The Southeast Asian city-state has grown into the world's fourth-biggest offshore financial centre but, with U.S. and European regulators on the hunt for tax cheats, the government is clamping down to forestall the kind of onslaught from foreign authorities that is now hitting Switzerland's banks. Before July 1, all financial institutions in Singapore must identify accounts they strongly suspect hold proceeds of fraudulent or wilful tax evasion and, where necessary, close them. After that, handling the proceeds of tax crimes will be a criminal offence under changes to the city-state's anti-money laundering law. Picture taken April 25, 2013. REUTERS/Edgar Su (SINGAPORE - Tags: CITYSCAPE BUSINESS) - RTXZBT7

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Efficiency boost

From an operational point of view, firms have used digitalization to streamline processes, such as communicating investment ideas between different business units, in a more efficient manner.

Externally, technology has allowed banks to make account information available and up to date, freeing up resources to be used elsewhere.

It also enhances risk management and regulatory compliance capabilities and the electronic audit process helps to track accountability for individuals and teams across the business.

But most of all, the digital revolution is changing the way services are provided to clients.

Unstructured data to actionable insights

Digitalization should lead to an increase in transaction activity as the client has more scenarios and possibilities to examine for investment potential.

However it is important to not just generates ideas, but also manage them using relevant data and to facilitate action on the truly profitable ones.

With wealth managers having access to a broad range of CASM (Cloud computing, Applications, Social media, Mobile) connections, it helps them deliver their services in a faster, more interactive and bespoke fashion.

Investors are empowered in their decision making rather than confused.

Relevant data appears within their account view alongside functionality that helps them focus on their goals and make intelligent investment decisions.

Digitalization will also enhance the firm’s ability to develop new offerings for its existing clients and to grow its client base, thus expanding value propositions and driving sales for the business.

Digital quotient

Digitalization brings as many challenges as opportunities.

Perhaps the greatest of these is to understand a client’s true digital quotient. Only once that is defined can the relationship manager build a true client profile.

Adopting new technologies that they are not yet prepared for is an easy but dangerous trap for clients to fall into.

Wealth management firms need to see digitalization as an opportunity that improves and personalize the client’s investment process with a blend of technology and goal based investing concept in mind, rather than feel intimidated by digitalization that is beyond their comfort or knowledge level.

Information overload

Just as it is easy to overwhelm a client with new digital tools and capabilities they are not prepared for, it is also possible to discourage and confuse them with too much information.

Customer interaction with relationship managers is still a critical factor, but clients need to be given the right information for their profile at the right time.

This means delivering information and advice that suits their investment horizon, appetite for risk and financial understanding.

Content and analytics are critical, and should be delivered in a bespoke manner, depending on a client’s investment sophistication.

With digitalization, the relationship manager’s role is to enrich client engagement and help them implement investment strategies efficiently rather than simply deliver content and analytics.

However, that new role still requires them to interpret information and guide retail investors with up-to-date and cross-asset financial market data, sophisticated tools and trading capabilities through a dedicated web and mobile portal.

Different role

Digitalization changes the role of the relationship manager. No longer are they the client’s main information channel.

This role is supplemented by digital solutions, which can provide access to an unprecedented flow of data from thousands of sources across global markets in a faster, more efficient way than wealth managers can deliver them.

Digitalization frees relationship managers from routine tasks and administrative work, allowing them more time to address clients’ needs and concerns.

This is a marked change from the past, and one that many wealth managers struggle to make.

No time to wait

In conclusion, the road to failure for wealth management firms is set if they adopt a wait and see approach.

The longer they take to adopt these changes, the challenges will only get tougher as they will be running a higher risk of losing their market share to peers or new entrants.

With the advancement in technology, the wealth management industry is evolving from a channel for financial products to a channel for financial advice.

Digital Solutions: Powerful web and mobile-based fintech capabilities