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Digital Solutions for Wealth Management 2.0


Today’s Wealth Management industry is facing some profound challenges - regulation (RDR, FATCA, Basel IIII, Mifid II), unsteady economic landscape, clients, who no longer trust that Investment Managers can generate reasonable returns. To retain existing clients and attract new, Private Banks need to shift their focus from looking purely at investment returns and fostering old client base, to proactively rethinking their business models and engaging with the new generation of wealthy clients.

Last month, Capco was one of the main sponsors at a Wealth Management conference organised by Marketforce, where top representatives of Private Banks (from niche players such as Rothschild to larger institutions including Deutsche Bank) shared their views on the future of Wealth Management and on the ‘catalysts for change’ that are likely to drive the renaissance of the industry.

Digital was one of the key topics on the agenda. But was also clear that not many Wealth Managers are already utilising digital channels and that we are at the beginning of the journey. 

Industry facts & figures definitely support Digital:

-          IT spent by the global wealth management industry will reach almost $35bn by 2016 and will include heave investment in Digital Channels

-          Between 2011 and 2016 IT spending will grow at a compound rate of 6.3%

-          50% of private banks expect to embrace mobile technologies by next year

-          Twice as many advisors (22%) use iPads or other smart devices than a year ago (11%)

-          47% of ultra high net worth individuals are Facebook users

-          19% of millionaires are on Linkedin

Although there has always been some resistance to using Digital in Private Wealth Management, clever Digital Strategy will be vital to keeping ahead of the game in the new environment.

Key catalysts of change in Private Banking

So, how can Digital be employed to add value to Private Wealth Management Services? Let’s take a look at the key ‘catalysts’ for change in Private Banking discussed on the conference and how Digital Services can play a role in providing solutions to those challenges.

1. Increasing amount of regulation and diminishing profitability

By the end of the year all Private Wealth Managers are required to comply with RDR, which as some believe will ‘shake up’ the industry. The changes RDR calls for, including changes to pricing structures, better products suitability and higher quality of service will bring a new environment - where transparency is key. We have already seen some changes to the structure of the industry, as those IFAs who are not able to comply are either closing their businesses or merging with larger Wealth Managers. Here is another challenge to Private Banks – how to endorse the new customer segment – ‘mass affluent’ – who used to be serviced by IFAs? How to make the most of this new acquisition given that ‘mass market’ segment generates less revenue than the upper scale clients of Private Banks?

This new, more transparent environment will be a great opportunity to integrate technology to assist advisors in the transition process and build more fruitful relationships with clients and introduce more efficient operating solutions to conquer the diminishing profitability. As client interaction is key to the business, it is the client interface that needs to change in the first place. Digital can play a truly multidimensional role in reinventing Private Wealth services.

One of the big themes is digital self-servicing. Digital channels, both online and mobile allow for an increased amount of self-servicing and therefore reduce costly face-to-face client-advisor interaction through a number of interactive tools. According to research, clients’ top five self-servicing Digital Tools include:

- Price performance reports – easily digestible rich financial data condensed into sleek reporting dashboards available on Wealth Managers website and through mobiles and smart devices

- Asset allocation (portfolio) – key investment management tool, enabling investors to create custom reports and quickly see information relevant to their investment strategy often supported by extended fund information

- Interactive charting – interactive charts that can be customised to use different filters to quickly see desirable information about own portfolio/stocks/funds

- Watch lists – following favourite companies and stocks

- Financial planning tools – enabling financial projections for different purposes, including retirement planning

Reuters has produced a truly impressive suite of self-servicing products and through its real-time application delivers a wealth of content about the markets, fundamental research covering 42,000 companies (90% of World’s capitalisation) as well as integrated portfolio analytics capabilities. This content can be also easily customised and exported to Excel for further analysis.

Another way in which Digital can provide a panacea to the diminishing returns is to increase customer engagement. Helen Foran in her article ‘Engagement is the Journey, Loyalty is the Destination’ emphasises how existing customers are more profitable than the newly acquired ones and proves how ‘engaging’ customers improves revenues through upsell, cross sell, larger number of referrals, reduced churn and enhanced brand loyalty. A ‘fully engaged’ customer can deliver 23% more revenues. Engaged customers enjoy the service, come back to it, follow investment news published by the provider on twitter, are ‘loyal’ and less likely to switch. How Digital can engage wealthy clients?

2. Changing customers profiles

Knowing your client is key to building an engaging experience. Let’s look at behavioral traits of the wealthy. As research shows, majority of HNWI, mass affluent and mass market Private Wealth customers are ‘Soloitst’, they like to be in the know and in control of their investment decisions. Hence the self-servicing tools portrayed are likely to be positively received. They also expect a premium service and prefer to be private. But there are some significant differences between the ‘old money’ and the new generations of wealthy; Capco’s White Paper ‘Time transfer bomb in Wealth Management’ talks about exactly that – how to keep up with the needs of the nouveaux riches via using digital technologies?

They are on the go, time poor, demanding – and like to be receiving only information that is relevant only when they want it. Providing a ‘superior digital experience’ is difficult. As they are extensively traveling and heavily using mobiles and tablets, re-invigorating on-line and mobile platforms, will be crucial to reaching the new wealthy.

Mobile, already being widely explored by retail banks, will play a big part. 68% US investors use their mobiles to access data and place orders. A significant number of firms are now also piloting – or already have apps, although these are generally still very limited in terms of the available content and/or global reach. An app that will engage the new wealthy is required to provide interactive charts, ability to rate funds and connect with other investors via social media. Videos with advice from fund managers and instant chats will reduce the face-to-face time while satisfying the ‘on the go’, ‘time poor’, but information-hungry clients. Security (multi level encryptions, such as HTTPS in addition to proprietary protocol) between mobile application server and the devices is key.

At other end of the client relationship, there are mobile and/or tablet applications for financial advisors that help to engage the client by facilitating meetings. Sunguard’s tablet-based application “WealthStation” Mobile Report Access provides advisors with tools to make the most of their client meetings and transform their client interactions, gain their confidence and establish a solid foundation to help client and revenue growth and retention.” The app contains client and prospect data, financial reports, investment news, and information about client’s portfolio performance to support financial planning. It also reduces the need to print and carry reports.

3. Erosion of trust

Numerous surveys suggest that the client-investment manager trust has disappeared over last few years. Bad communications, lack of transparency and the inability to engage, certainly don’t make up for weak markets. How to rebuild the trust and loyalty using Digital?

Social media can, paradoxically, be a very strong brand building tool and ‘reputation protecting’ tool. Via social media Private Wealth can not only provide investment information/news and research but also connect with clients and build relationships via continued dialogue - when well-integrated, will send a strong branding message and help to create a trusted advisor image.

Great example of how relevant this is - last Friday (the 20th of November) BAML Wealth Management announced that the bank is entering Flipboard (Web application use to assemble content on tablets, mobiles and other smart devices) and will utilise it to share research as well as investment opinions of their economists and other experts. This is to satisfy their clients who, according to BAML, are on the go and increasingly use mobiles to access ‘ideas about issues of importance to them’. BAML, an aggressive player in the Digital Space has been engaging with the ‘new wealthy’ via Twitter since 2011, posting investment advise via you tube, iTunes and hosting live web podcasts. Smart!      

Coutts is another great example of a Social Media regular – present on Facebok and YouTube since 20009. Its Head of Digital Philip Allen, who gave a speech on the Marketwatch conference about ‘How can be reputation best protected in the age of instant online communications?’, believes that ‘Commentary about banks and banking within social media can have a real impact. For example, a Facebook campaign earlier this month was urging customers to switch from banks to credit unions in the US. This had a direct impact on banks in the US and many thousands of people moved their accounts’. Key to rebuilding your reputation is to be in total control of what – and how - is being said.

4. Changing Business Models

Changes to the business models will be driven by two forces: a. RDR, which will result in M&A activities and encourage Private Bank to endorse the ‘mass market’ segment, historically served by IFAs and b. the desire to increase efficiencies and implement new client interfaces to keep up with the markets and adjust to the new post-RDR landscape.

Private banks need to become more nimble, leaner. Upgrades to operating model are required to re-build the lost trust, as well as to engage with the ‘new wealthy’; Delivering superior customer experience will not be possible without embracing Digital an integrating Digital Solutions with other channels.

The way forward is to take on board Digital Strategists and prepare Digital roadmaps that span across web and mobile platforms, social media and digital elements interaction in personal advice.


Comments: (2)

Nicholas Hacking
Nicholas Hacking - ERI Bancaire SA - Geneva 30 April, 2013, 04:22Be the first to give this comment the thumbs up 0 likes

A very interesting article, but it is not clear when it was written, as it seemed to have been published very recently, yet in the article refers to a much earlier date ("last Friday (the 20th of November)") of an unknown year.

Nevertheless, much of what is said is still very valid.

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 30 April, 2013, 17:07Be the first to give this comment the thumbs up 0 likes

Detailed article. According to anecdotal evidence, a lot of the nouveaux riche crave for societal recognition. If your research supports this, private banks and wealth management SBUs could deepen their engagement with this segment of customers by providing them with opportunities to speak during public events and otherwise fulfill their higher levels of needs and wants in the Maslow's inverted pyramid. 

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