The pandemic has driven even the most traditional client segments to adopt digital platforms while turning new client segments onto investment management making the evolution to a modular, personalized, and hybrid advisory approach inevitable.
Robo-advisory models are also gaining traction to make investment services accessible to a greater range of customers, with 34% of HNWIs interviewed in the report saying they actively use a WealthTech firm to manage their assets. This now opens opportunities for tech firms to enter the wealth market.
Capgemini’s 2021 World Wealth Report (WWR) has revealed the new generation of high-net-worth individuals (HNWI) are significantly more tech-savvy. 71% of APAC HNWIs say that they prefer digital self-service over receiving humanitarian assistance, while 72% of HNWIs are investing in cryptocurrencies and other digital assets.
While more HNWIs are taking investing into their own hands, wealth managers still play a critical role in complex decision making such as building and managing portfolios. 69% HNWIs in APAC consider Wealth Management (WM) firm recommendations and followed their advice, while 15% delegate all their investment decisions to their firm.
However, to keep up with the demands of its evolving market, technological and digital advancements will be key to the continued success of WMs firms everywhere.
The report also noted that technology breakthroughs, changing social dynamics, new ecosystem players, the democratization of investment management, and the rise of digital channels and assets necessitate a new competitive game plan for wealth management firms.
Challenges for WM firms
Acknowledging that the whole WM space is evolving, Elias Ghanem, global head of market intelligence at Capgemini, cites four observations in terms of the market.
“First, high net worth (HNW) individuals want to invest digital themselves. They really want self-service tools. It’s important to remember the power of data and analytics is essential (here) to best engage with the customer.
“The back-office needs to be primed for optimised operation, open to supporting new market opportunities through collaboration with the ecosystem. Finally, wealth managers must support a sustainable investing era,” he added.
The fallacy and reality of millennials
To Ghanem, the millennial is a mindset. “The only real difference between Boomers and Millennials is the preference for more personalised human contact. Boomers are less mobile; they are less all over the place. This translates to preferring long-term relationships with a personal advisor,” he continued.
Ghanem opines that even among mature investors, tech platforms supported by artificial intelligence is not out of the limits of possibility. It just needs to be delivered by a human.
Influence of Wealth Tech in WM today
Ghanem is of the belief that WM firms need to push the frontiers – be willing to embrace new-age competitors. They can do this through collaboration with what he refers to as new-age tech firm skills while strengthening traditional wealth management institution identity.
The widening gap
Ghanem is concerned that this collaboration is not moving fast enough. “There remains within WM firms a significant IT gap between expectations and reality,” he called out.
To close this gap, he believes it is important for WM firms to adopt sustainable investing practices and put effort into collaborating with the start-up ecosystem.
To Ghanem, this raises four moments that need to happen for any successful collaboration between traditional WM firms and the start-up ecosystem: open innovation, evaluation, acculturation, and a scale-up ecosystem.
Advice for WM leaders
“It’s about having a mindset that willingly accepts and embraces change,” called out Ghanem. “Technology will be at the heart of the response. Now is not the time to be planning. We should be executing.”
Click on the PodChat player and listen to Ghanem list out the challenges and opportunities for wealth management firms to address the needs of digital-savvy clients – those with millennial mindsets – as well as the pitfalls of taking too long to address the changing needs of clients.
- How has wealth management (WM) changed since 2019?
- Who is driving these changes?
- What are the challenges for wealth management firms as they look to adopt technology into their practice?
- What are the bare minimum tech wealth management firms should invest in as part of their digital transformation strategy?
- What, in your opinion, is the role of WealthTech in the development of wealth management firms?
- What is your advice for leadership at wealth management firms in deciding the course of direction for their organisations?