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Technology in Wealth Management: Opportunity or Threat?

Wealth management is an attractive business line for banks. Affluent clients hold higher balances, have lower credit default rates and utilize more fee-based services than the average branch consumer. No wonder forty percent of bank leaders surveyed by KPMG in June 2012 said that wealth management would be a critical component of their growth plans[i]

That's not to say it's an easy business. The economic, regulatory and competitive challenges that all banks are facing impact wealth managers too, and changing demographics pose a unique threat to the segment. The reality is that technology will present both opportunities and threats in 2013.

Unique Challenges

Technology companies like to describe their role in a ‘value stack’ for clients. In banking, the value stack is comprised of three primary sets of activities undertaken for the benefit of their customers. The first set is balance sheet activities—gathering deposits and making loans. The second set is payment activities—moving dollars and data from point A to point B. The last set is advisory activities—providing expertise and advice. Most bank departments can provide some combination of all three activities, but wealth management is primarily about deploying intellectual capital to help clients grow, protect and transfer their wealth effectively and efficiently.

Technology has generally been more of a threat than an opportunity to the wealth management business over the past twenty years, as financial information became more easily accessible and online brokers democratized trading platforms. Firms that made money simply by being gatekeepers of asymmetrical information evolved or died.

Most financial firms have tended to allocate their tech spending to two extremes; either for enterprise needs to meet compliance mandates or improve internal operations (ERP, CRM, core systems, trading platforms, etc.) or to enable self-service for their customers (ATMs, online banking and brokerage, mobile banking, etc.)


Self Service Alone Not Enough

Survey results fluctuate during different economic environments, but over the long run, roughly a quarter of clients prefer self-service in managing their money. A slightly smaller group wants to pay someone else to do just about everything, but most clients fall somewhere in the middle. They don’t want to pay excessive fees for services they don’t want or use, but they want advice when they want it, usually related to a change in circumstances, such as an inheritance or a major life change.

In other words, self-service alone is not enough, and firms will need to invest in technologies that can scale profitable advice delivery.


Unique Opportunities

Financial institutions of all sizes want to improve their business with affluent customers (those with at least $100,000 in assets) and high net worth customers (those with at least $1 million). These customers want and need advice on managing and transferring their wealth, and there is a massive opportunity to leverage technology to enhance, not replace, the advisor/client relationship.

Banks are struggling to grow revenues and manage expenses, and technology can help in addressing four key challenges:

1)    Acquiring new clients and taking market share. Seventy Nine percent of financial advisors surveyed by said that their number one avenue for growing their business over the coming 12 months would be acquiring more clients[ii]. They are all convinced they will take market share from one another, but a compelling and differentiated value proposition will be required. Banks will need to use analytics to determine segment behaviors and needs; social media and content management systems to reach targeted prospects with their thought leadership; and onboarding tools to ease the pain of switching institutions.

2)    Retaining current clients and future generations. Banks are investing in new mobile and tablet technology to improve client engagement and meet the expectations of younger generations. Forty-two trillion dollars of wealth is expected to pass down from the Traditionalist generation (those born before 1945) and the Baby Boomers (born roughly 1946-1964) down to Generation X (1965-1983) and Generation Y (1983-2001) over the next couple of decades. Ninety percent of beneficiaries have little interest in staying with the firm that managed their ancestors’ wealth.

Millionaires under age 45 today are four times more likely to be interested in their advisor’s blog posts or Twitter feed, and nearly six times more likely to ‘like’ their advisor on Facebook than older millionaires.[iii] Tablets have the capability to transform the across-the-desk client/advisor conversation to a shoulder-to-shoulder collaboration, but the technology cannot do it alone. Firms will also need to invest in designing new client discovery protocols and advisor training. Remember when laptops came on the scene and revolutionized the client/advisor experience? We don’t either.

3)    Expanding existing relationships. Forty nine percent of advisors in the survey cited above said they planned to grow their business from increasing business with their current clients, the second most popular response.[iv] Again, this is about taking market share, and banks will need to offer a better client experience. They will also need to go beyond PFM to add context and insight to big data dumps, tying account aggregation data to financial plans and adding client portals to improve collaboration.

4)    Managing expenses. Banks often perform brain surgery when prescribing an aspirin would work, and sometimes vice-versa. Workflow automation and Straight Through Processing solutions can improve the efficiency of routine transactions and decision-making, and free up advisors for their highest and best use—acquiring, retaining and expanding their client relationships. And advisor can deliver their best advice when they have an in-depth knowledge of their clients’ situation, preferences and goals. Better reporting and analysis of data aggregation can be a big help.


No Silver Bullet


Technology can definitely help banks address these challenges, but the payoff can be elusive. Merely implementing a piece of technology without the context of delivering true value to clients will typically become an expensively disappointing project. The gap between high expectations and the longer growth curve of real value often leads to the ‘hype cycle’ that Gartner describes so well[v]. The gravity of reality will inevitably pull banks down from the Peak of Inflated Expectations and into the Trough of Disillusionment.

Further exacerbating the challenge of realizing the promise of technology is the industry’s own habit of viewing it as a threat (or simply irrelevant) rather than as an opportunity.

Finextra recently reported on a YouGov survey in which 76% of 1000 high net individuals said “it’s not a focus on technology they want, but a one to one personal service.” The article also cited a separate study by UK Private Bank Duncan Lawrie of 350 wealthy individuals, in which only 12% “said that the introduction of new technologies and innovations would make them switch banking provider.”[vi]

“It seems that the key for banks to trying to re-establish their customer’s faith and loyalty is to sit down and talk,” YouGov is quoted as saying in its summary of the results. Does this mean that all clients really want after all is a face-to-face personal relationship with their advisor, new fangled technology be damned?

As much as this might be welcome news to legions of baby boomer financial advisors and bank executives, we don’t think so.

We have not examined the raw data of either of those surveys, but based on other research and our industry and client experience, we don’t believe clients are saying “don’t give us technology”, but rather  ”don’t think that implementing technology alone will cause us to be happy with your firm”.

Delivering personalized service and advice that is relevant and useful on the clients’ terms is what is needed, irrespective of technology. Many firms fail at this despite using technology that is only an upgrade or two from the set of Mad Men.


Wishful Thinking?

I have yet to yearn for a good old face-to-face meeting with my Google representative in his office, but I do believe that technology should support and enhance the advisor-client relationship.

I also heartily agree that technology alone is not enough for the majority of clients to feel value (or valued) from their wealth management firm, but I also believe that some in the industry are employing a lot of wishful thinking in interpreting the results of such surveys.

Executives at Blockbuster and Circuit City probably felt the same way.



[i] Jackie Stewart, “9 of 10 Banks are Mulling Overhaul, Survey Finds”, American Banker, June 6, 2112,, accessed December 2012.

[ii]  “Results from’s recent practice management survey”, October 26 2012,,, accessed December 2012.

[iii] Adriana Reyneri, “Young Millionaires, Social Media and Advisors”, Millionaire Corner, October 12, 2012,, accessed December 2012.

[iv] Ibid.

[v] Gartner, Inc.,

[vi] “Spend more on personal care and less on technology, wealthy customers tell banks”, Finextra, November 12, 2012,, accessed December 2012.




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