Paperweight: Wealth management is still among the least tech-literate sectors of the financial services industry
- Although digital transformation in wealth management has been an important theme for a long time, its adoption has still been relatively slow, according to experts.
- Even digital transformation efforts among wealth management players are still very passive and a lot of changes are required to avoid being left behind.
While the world saw an accelerated wave of digitalization in the global economy over the past decade, the wealth management industry surprisingly has been lagging behind. Frankly, the nature of strong customer relationships, brand legacy and tightly regulated business practices have made wealth management firms resist the early disruptions of technology. Unfortunately, we have reached a tipping point now and experts reckon that wealth managers will have to either step up with their digital transformation or risk getting left behind.
To be fair, the financial service sector globally has been facing a renewed digital reality over the last decade where flexibility and convenience prevail. Perhaps the greatest lesson of the pandemic was the viability of non-traditional business models across the financial services industry. Not only is it possible to provide personalized advice for customers through digital services like a wealth management client portal, but investors increasingly demonstrate their preferences for digital channels.
Therefore, according to experts, clients have started to put pressure on the current engagement model in wealth management, demanding greater personalization and efficiency, especially since Covid-19.
“I personally feel the industry has not effectively adopted technology to its best capability,” Maybank head of group wealth management Alvin Lee shared during a roundtable discussion held by NEC Corporation of Malaysia.
Lee further added that when it comes to the wealth management segment, digital transformation journeys have been “more evolutionary rather than revolutionary”. He highlighted that with the right investment in innovation and digitization, wealth managers can not only enhance efficiency through front-to-back automation and leaner processes, but also future-proof their businesses by upgrading client touch points and overhauling their value propositions.
Sharing similar sentiments, CIMB Investment Bank Bhd’s CEO Jefferi M.Hashim also noted that the wealth management industry is certainly not immune to transformation and swings in client expectations. “As in other industries, companies that embrace technology to adapt to the change will be on the winning side,” he commented.
Another industry expert, Red Hat’s director FSI Arwind Swami, also shared that wealth management firms cannot assume that length of experience, brand prestige or even the quality of their client relationships will insulate them from this possibility. Considering that millennials are growing in economic power, Arwin reckon firms will be courting a more tech-immersed generation.
Overall, in a study by Deloitte that is based on 25 conversations with industry leaders in the APAC region, it is found that the wealth management business model has proved its resilience. However, clear differences in the way APAC firms handled the crisis were noticed. “Most wealth managers applied a somewhat traditional approach, many still partially working from the office and relying on conventional communication technologies,” it said.
In comparison, Deloitte noted that investment managers, fintechs and digital leaders, on the other hand, mostly enabled location independent ways of working through digital tools granting secure remote access for employees. The study also noted that a more digitally enabled front office will be a key requirement for wealth management companies.
“Most prioritize digitalization around client onboarding, while leaders also digitally support the traditional human elements of the client life cycle: prospecting and client advisory. In the long run, wealth managers will benefit significantly from efficiencies from increased digitization – contributing to a much needed increase in profitability,” the study noted.
What is certain is that overall, the Covid-19 pandemic has not fundamentally altered the industry’s strategic imperatives, but experts reckon it will further accelerate the difference between winning wealth managers that explore innovative edge business models, increase their operational agility and engage digitally with their clients – and other firms with a more reactive approach.
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