By David Everett, Strategic Accounts Lead, Liferay UKI

To say that the wealth management industry is undergoing significant transformation would be an understatement. The entire sector is grappling with how to conduct business in a post-pandemic world while respecting the consumer and financial adviser experience. Today, wealth management firms must be able to give better, more comprehensive experiences in automating real-time reporting on client portfolios and wealth products. Wealth management is primarily concerned with market insight and portfolio trajectory. The use of data and unifying systems delivers the richness of foresight that new consumers and younger investors expect when working with Wealth Management institutions.

One of the reasons for the wealth management industry’s sluggish adoption of digital transformation is the nature of their work. They built their business on personal relationships and human interaction, both of which appear to be in conflict with technology. Add to that advisors’ belief in their ability to deliver superior service than impersonal robo-advisers and mobile apps.

Family offices lag the most, with more than half still in the early stages of their digital transformation. This could be due, in part, to a conviction that they cannot automate their clients’ more complex financial problems without reducing service quality.

Company size appears to be a role in wealth management digital transformation as well, with larger firms often making more progress than smaller companies.

A recent study on the impact of digital transformation on wealth management clients in the UK found 81% of wealth managers reporting a better experience with clients. Wealth management clients are changing and so are their expectations. They want a greater range of services than many firms can provide without digital adoption.

Some of the ways that digital transformation can improve wealth management include:

• Fee and cost pressures: Clients are increasingly fee-conscious and want to know what they are paying for
• Competitors deliver a better experience: Robo-advisors and FinTech are better prepared to offer products and services that match the digital expectations of today’s clients
• Client dependency on technology: clients now enjoy real-time and curated content that caters directly to them, anywhere and anytime
• Client expectations: clients want their investment firms to provide service on their terms – not the company’s

The great wealth transfer

Millennials and their financial habits may make the headlines, but Gen Zers are also next in line. They are now moving into a new era of their lives in which they have significant investable assets. Wealth management firms must start understanding the wants and needs of these new generations of clients. To highlight just how important this issue is right now, one of the hot topics at this year’s Digital Integration in Wealth Management Conference, in London is improving digital experiences for the next-generation investor.

Compared to their parents, Gen Zers and Millennials like to be more involved in their investing. They prefer to do their own research and want to understand the options available to them and how they fit in their overall investment plans. They pride themselves on their DIY skills, so earning their trust and business will take more effort.

Firms that think they can wait until tech-savvy Millennials are ready for their services will be left behind.

Pandemic impacts on the industry 

Perhaps the greatest lesson of the COVID-19 pandemic was the viability of non-traditional business models across the financial services industry. It is not only possible to provide personalised advice for customers through digital services like a wealth management client portal, but investors increasingly demonstrate their preferences for digital channels.

The pandemic also affected the wealth management client experience and risk tolerance. Pre-pandemic, wealth management clients were risk-averse, preferring safer investments. Surprisingly, younger clients are already taking steps to lower their risk. For the foreseeable future, clients across the board have altered their investing outlook in the wake of the pandemic.

Encroaching competition 

Wealth management firms are facing increased competition from fintechs and robo-advisors aiming for their market share. These groups can provide many of the digital offerings clients want, but they lack customer awareness. So far, wealth management firms have used this to support their higher fees, but that’s a position that will likely change.

Another interesting change is the way the wealth management industry segments clients. As they stop looking at them solely through the lens of wealth status, they are starting to see that some high-income clients may not be as profitable as they originally thought. With this perspective, firms that accept clients based on net worth may be losing out on revenue.

Hence, thanks to new technologies regarding device-independent client engagement over different interaction channels and automated investment solutions such as robo-advisory, the individual and mostly less complex requirements of many clients and wealth management potentials can be served with cost-effective digital and automated solutions.

Technology entering the advisory space

There is no doubt that technology will play an increasing role in the advisory world. For that reason, analysts expect groups like Meta, Amazon, and Google to enter the wealth management space. By adopting digital technologies sooner rather than later, firms will be better able to withstand that wealth management disruption.

Making digital transformation a reality 

Ignoring digital transformation is no longer an option for wealth management firms. They need solutions to fill the gaps between the traditional business model and the increasing demands of the customers who want digital services.

As you begin developing and implementing your digital strategy, it’s imperative to prioritise your needs based on business impact. You don’t have to roll out the entire plan at once and will find the change easier to handle when it’s done in increments.

Liferay is attending London’s Digital Integration in Wealth Management Conference later this month and will be at Stand 10.