Top 5 Digital Transformation Challenges In Wealth Management

When it comes to meeting challenges, there are two truths. First, effective problem solving involves digging at the roots instead of hacking at the leaves. Second, a problem can’t be solved until we ask the right questions. So along with digital transformation challenges, let’s look at the dynamics that creates them, and ask questions that help us solve them.

How large is the AWM industry?

One PwC release talks about how with $110 T in assets (2020), the asset and wealth management (AWM) industry can quite literally shape a better future for investors, shareholders, the economy and the society. As one considers the growth projection of 5.6% YoY, and the resultant size of $147.4 T (2025), the enormity of it all sinks in.

Moving from ‘What-if’ to ‘What-is’.

For years now, AWM industry could have used benefits that fell off the pandemic. It is an odd statement to make (after all, no one wants an event of such scale and destruction). In the context of AWM digital transformation, wealth management systems primarily functioned with back-office support and on legacy platforms. The digital presence was limited. The anachronistic practice worked on one-to-one, product-led advisement. Not anymore. Consumers today discover products digitally and decide differently.

Technology undoubtedly is at the heart of the modernization, but successful wealth management transformations need to be customer-centric powered by scalable next-gen platforms.

With that caution, let’s get down to the top 5 digital transformations in AWM

1. Managing the wired investor. Slow adaptation to demographic shifts.

No longer is the lucrative AWM segment made up of 50-year-olds. The segment sees a growing number of HNW millennials and women. A recent world wealth report posits that HNW clients are likely to transfer $68 trillion within 25 years to their heirs. Firms and technologies, as the study highlights, are neither prepared to manage expectations of new-age beneficiaries nor have a plan to arrest 80% of heirs that are likely to change financial advisors. For meeting the unprecedented scenario, both advisor experience and machine-learning approaches are necessary.

Transformation Trigger

Do your solutions fuse optimal elements from science-based advice (asset allocations, mutual funds selections etc.) with human-based advice (more complex needs – tax & asset planning etc.)?

2. Rise of emotional analytics. AI-based wealth management.

In a client-advisor relationship, human emotions guide and reveal the most important component: trust. Even so, the same validated human behaviour AI technologies deployed in making autonomous vehicles and remote medicine, are enabling financial advisors to bring up best interest by detecting (and managing) client behaviours.

Transformation Trigger

For your AWM organization, what is the appetite for AI-based targeting and personalization initiatives through emotional analytics solutions?

3. Behind the curve on Big Data and Analytics. Creating Insightful Personas.

Gauging real-time market sentiments, hyper-personalizing services, and providing for omni-channel customers who have several bank accounts, call for advanced analytics. AWM firms using simple analytics (MIS reporting systems) for mining customer insights, and assessing product penetration, are woefully behind in the digital transformation race.

Transformation Trigger

When it comes to Data Analytics, how much of time are you making for tracking business performance, client acquisition, sales & retention, and ultimately, client advice?

4. Underutilizing the power of API’s. Growing reach.

AWM companies that are in a fast catch-up mode are prioritising their business tactics – calibrating clients, clearing out legacy systems, and rationalizing portfolios.

Success of these repair initiatives will however depend on how deep they engage with the ecosystem and equip workforce with newer capabilities.

Eventually, their growth narrative will have to face up to two imperatives:

            I.Bring in agility through platform customizations and

          II.Enable remote access that covers wider geographies

These two essential value-plays are fulfilled through API’s (application programming interfaces).

Transformation Trigger

For introducing new functionalities, sharing analytics with client, or even, for reducing costs, how well-versed is your wealth management company with ‘everything-API’?

5. Embracing Digital Transformation at the core. Holistic goals-based advice.

While AWM organizations make investment in Data, Analytics, AI and other technologies, most fail to embrace it as a culture. There are exceptions though. Like the Toronto-based TD bank group’s program, called WealthACT. Today investment advice is largely commoditized for mass market offerings. Also, post-pandemic, the investing environment has grown uncertain and complicated. To combat this, leading AWM firms invest substantially to train employees on goals-based advisory frameworks.

The digital transformation challenge, however, comes from a lack of access to right tools and a maturity-approach that asks for a complete embrace of ‘digital as a culture’.

Transformation Trigger

In your AWM company, does the digital transformation programs specifically include skills for understanding emerging tech, and building empathy for the ‘new-wired’ customer?

When it comes to meeting challenges, there are two truths. First, effective problem solving involves digging at the roots instead of hacking at the leaves. Second, a problem can’t be solved until we ask the right questions. So along with digital transformation challenges, let’s look at the dynamics that creates them, and ask questions that help us solve them.

How large is the AWM industry?

One PwC release talks about how with $110 T in assets (2020), the asset and wealth management (AWM) industry can quite literally shape a better future for investors, shareholders, the economy and the society. As one considers the growth projection of 5.6% YoY, and the resultant size of $147.4 T (2025), the enormity of it all sinks in.

Moving from ‘What-if’ to ‘What-is’.

For years now, AWM industry could have used benefits that fell off the pandemic. It is an odd statement to make (after all, no one wants an event of such scale and destruction). In the context of AWM digital transformation, wealth management systems primarily functioned with back-office support and on legacy platforms. The digital presence was limited. The anachronistic practice worked on one-to-one, product-led advisement. Not anymore. Consumers today discover products digitally and decide differently.

Technology undoubtedly is at the heart of the modernization, but successful wealth management transformations need to be customer-centric powered by scalable next-gen platforms.

With that caution, let’s get down to the top 5 digital transformations in AWM

1. Managing the wired investor. Slow adaptation to demographic shifts.

No longer is the lucrative AWM segment made up of 50-year-olds. The segment sees a growing number of HNW millennials and women. A recent world wealth report posits that HNW clients are likely to transfer $68 trillion within 25 years to their heirs. Firms and technologies, as the study highlights, are neither prepared to manage expectations of new-age beneficiaries nor have a plan to arrest 80% of heirs that are likely to change financial advisors. For meeting the unprecedented scenario, both advisor experience and machine-learning approaches are necessary.

Transformation Trigger

Do your solutions fuse optimal elements from science-based advice (asset allocations, mutual funds selections etc.) with human-based advice (more complex needs – tax & asset planning etc.)?

2. Rise of emotional analytics. AI-based wealth management.

In a client-advisor relationship, human emotions guide and reveal the most important component: trust. Even so, the same validated human behaviour AI technologies deployed in making autonomous vehicles and remote medicine, are enabling financial advisors to bring up best interest by detecting (and managing) client behaviours.

Transformation Trigger

For your AWM organization, what is the appetite for AI-based targeting and personalization initiatives through emotional analytics solutions?

3. Behind the curve on Big Data and Analytics. Creating Insightful Personas.

Gauging real-time market sentiments, hyper-personalizing services, and providing for omni-channel customers who have several bank accounts, call for advanced analytics. AWM firms using simple analytics (MIS reporting systems) for mining customer insights, and assessing product penetration, are woefully behind in the digital transformation race.

Transformation Trigger

When it comes to Data Analytics, how much of time are you making for tracking business performance, client acquisition, sales & retention, and ultimately, client advice?

4. Underutilizing the power of API’s. Growing reach.

AWM companies that are in a fast catch-up mode are prioritising their business tactics – calibrating clients, clearing out legacy systems, and rationalizing portfolios.

Success of these repair initiatives will however depend on how deep they engage with the ecosystem and equip workforce with newer capabilities.

Eventually, their growth narrative will have to face up to two imperatives:

            I.Bring in agility through platform customizations and

          II.Enable remote access that covers wider geographies

These two essential value-plays are fulfilled through API’s (application programming interfaces).

Transformation Trigger

For introducing new functionalities, sharing analytics with client, or even, for reducing costs, how well-versed is your wealth management company with ‘everything-API’?

5. Embracing Digital Transformation at the core. Holistic goals-based advice.

While AWM organizations make investment in Data, Analytics, AI and other technologies, most fail to embrace it as a culture. There are exceptions though. Like the Toronto-based TD bank group’s program, called WealthACT. Today investment advice is largely commoditized for mass market offerings. Also, post-pandemic, the investing environment has grown uncertain and complicated. To combat this, leading AWM firms invest substantially to train employees on goals-based advisory frameworks.

The digital transformation challenge, however, comes from a lack of access to right tools and a maturity-approach that asks for a complete embrace of ‘digital as a culture’.

Transformation Trigger

In your AWM company, does the digital transformation programs specifically include skills for understanding emerging tech, and building empathy for the ‘new-wired’ customer?