One recurring theme is that technology is going to play a defining role in determining the winners and losers. A major reason for this drive towards technology is the unprecedented transfer of wealth and assets from baby boomers to digital native generations. In fact, over the next ten years, $8.6 trillion of global HNW wealth is set to change hands.
These digitally savvy investors will have high expectations of the private banks and wealth managers that they hire to handle their investments.
Banks are not fully ready to cater for these individuals, however. Fenergo’s own research finds that 90% of wealth management firms (FIs) do not have a digital client self-service channel for onboarding. Moreover, a further 52% of wealth managers are concerned about the current level of dropouts during onboarding.
This brings me to my first prediction…
Robo-advisors will increase pressure on client onboarding
Robo-advisors – digital platforms that help investors with algorithm-led financial planning via online questionnaires – are already revolutionising wealth management client onboarding.
Estimates for the future Robo-Advisory market predict $2.2 trillion and $3.7 trillion in assets to be managed with the support of Robo-Advisory services this year. By the year 2025, this figure is expected to rise to over $16 trillion assets under Management (AuM).<
I expect most institutions will invest in a robo-advisory channel over time but also adopt a hybrid approach, automating where appropriate to create a far more flexible client journey and provide a personal one-to-one service when dealing with high-net worth individuals.
The omnichannel approach will become essential
Organizations need to meet customer expectations and deliver a consistent service over every channel – online, mobile and in-person – and this capability must be delivered now to remain competitive. In the Cap Gemini World Wealth Report 2019, 84% of HNWIs demanded more digital interaction when obtaining advice/service from wealth managers.
Going back to my earlier point on intergenerational wealth transference, digital natives demand this level of service. Organisations need to adapt quickly to retain and attract tech-savvy clients. So how can the wealth managers stay ahead, not just play catch up?
By adopting Client Lifecycle Management solutions, with straight through processing, advanced APIs and frictionless digital outreach, wealth firms can provide a consistent and transparent centrally orchestrated client journey across multiple channels.
Only financial institutions that create unified client and advisor experiences across all touchpoints will deliver the standard of digital client experience that will garner increased engagement and transparency, foster collaboration and result in more assets under management.
Automation will grow, AI will find its niche
The industry faces considerable cost pressures, so there is a driving need to automate as many manual processes as possible. Banks and wealth managers recognize this fact but are still working out how to incorporate more automation into their ongoing processes.
Artificial Intelligence (AI) can help automate processes. This trend is coming from the insurance sector, where AI is playing a key role in enabling leading players like Aviva to create more personalized services.
Realistically, we’ve not seen AI emerge in wealth management and I don’t think we will at the core of the services, because the big data engines that drive portfolio management are already in place. Rather, I expect AI will be used to utilize data in a more effective way. This could be to anticipate client needs or to create a specific research hub or ecosystem for topics of interest to clients.
The regulatory environment has peaked
Finally, I believe that financial regulation creation has plateaued, so in this decade it will be the implementation of existing regulation that will be the key focus for regulatory bodies.
I also expect to see more consolidation in the wealth management sector, and there’s an opportunity for smaller players in the market. I think this will lead to a trend in outsourcing so that wealth managers do not hold the cost-base of providing a digital service, such as managing hosts of servers.
The key is that organizations are nimble about how they adopt technology. We’re seeing Asia and US lead in technology adoption, while Europe is still the most resistant to change.
But change must come. And it will. Those who work with financial technology providers to put in place a platform that recognises the core challenge and allows banks to capitalise on the opportunities of digitalization will ultimately be the winners in 2020 and beyond.