If I were ask you to conjure up an image of the wealth management industry, it would come as little surprise if you were to describe wood panelled offices and pinstriped suits. To describe the sector as one of the most traditional within the City of London’s Square Mile, whether that reputation was deserved or not, certainly until a few years ago, would not have been difficult.

Then almost exactly three years ago, when the government put the United Kingdom into lockdown in the wake of the coronavirus pandemic the future was brought forward. Everyone and every industry without exception felt the effects of the pandemic. However, for the wealth management industry business as usual simply didn’t exist, it couldn’t.

What then could an industry that primarily relied on personal recommendations and relationships and ultimately thrived on face-to-face consultations, do?  The truth is that many wealth managers were already considering how to implement technology solutions to drive innovation, generate economies of scale and drive efficiency and productivity.

Where prior to the pandemic there had been some thought about the potential application of technology, now, how technology can be harnessed is very much front and centre of the majority of wealth management firms’ thinking. Put simply, the pandemic acted as an accelerant, fast forwarding plans that wealth managers probably expected to put in place in five or more years’ time. Instead, they are now looking to put those plans in place today.

Challenges and opportunities ahead

As part of our work with PIMFA WealthTech, we recently surveyed the senior management across the wealth management industry to gain an insight into where they saw the greatest challenges and opportunities in tech adoption. Among the top four challenges the industry perceives in the near-term are adapting legacy infrastructure to meet new business demands, budget and resource limitations, cybersecurity, and keeping pace with new regulatory demands.

However, the biggest gains the industry sees as being possible sit within the realm of client profiling, prospect management and acquisition, client onboarding, and client reporting and analytics.

To drill down into these areas where it’s felt that technology will make a substantive difference a bit more in terms of client acquisition, the industry is examining how to create individualised offerings for clients, particularly service and product ‘hyper-personalisation’ that can address varied client experiences through platform-based client lifecycle management (CLM) via chat and voice bots and interactive voice response (IVR) tools.

In terms of client onboarding the wealth management industry is aware that people are increasingly willing to trust ‘single point identity-proofing solutions’. Research suggests that 2 billion people have already used biometric authentication for financial services, meaning this could be applied as a quick and efficient way to onboard clients in wealth management. Meanwhile, firms are beginning to leverage data-driven artificial intelligence (AI) to ease cumbersome Know Your Customer (KYC) processes during client onboarding to provide a ‘frictionless’ and better overall experience.

The wealth management industry is also keen to harness anti money laundering (AML) based biometric technology to verify identities for faster client onboarding, which could reduce operational cost and fraud loss. Among other client onboarding technologies now being utilised included the increased use of facial recognition to help reduce identity fraud and unauthorised access, along with likeness detection and AI-based active detection solutions all of which prove more accurate and reliable than traditional, non-digitised processes.

The client reporting functions the wealth management industry is examining revolve around real-time data, news, analytics, and reporting including continual client profiling and risk analysis, wealth planning, and customer relationship management tools, portfolio analysis, valuation, and relationship reviews. To deliver this, the industry is increasingly keen to harness the benefits of AI, machine learning, and natural language processing-based technologies to review market, static, reference, and alternative data sources.

Automation will feature prominently within the increasing use of technology in the wealth management industry. The automation of time-consuming manual processes obviously saves wealth managers valuable time and effort, streamlining data collection, data entry, and related administrative tasks. As a result, technologies that automate repetitive steps, thereby reducing overheads and ensuring consistent outcomes, are being pursued as these will allow wealth managers to spend more time looking after the client while providing a fully digital and seamless experience.

These four areas, client profiling and prospect management, client onboarding and experience, client analytics and reporting, and automation will be a priority focus for PIMFA WealthTech in the year to come as shaped by our industry Advisory Council. There is much more that the wealth management industry wants to do to advance its use of technology and drive greater efficiencies and economies of scale but presently, these four areas will be our focus for the benefit of the wealth management industry.

In the future as the number of High New Worth millennials and women investors increase, wealth management firms expect to be at the forefront of offering experiences. Technology will be vital to providing those experiences.