The wealth management industry was well on its way to experiencing significant disruption. Fintech startups, cryptocurrency, and innovations in artificial intelligence (AI) and machine learning (ML) began to rock one of the last traditional markets left standing in the wake of digital disruption.
In 2020, that change was accelerated as a tsunami of new retail investors entered the market. Even though the year was marked with turbulent markets, a new generation of investors that were younger, less wealthy, and more racially diverse than past generations entered the market for the first time, according to research from the FINRA Investor Education Foundation (FINRA Foundation). This new group of investors stands poised to push the wealth management market into a new normal of doing business as they bring a host of expectations, standards, and desires to the table.
The Self-Service Investor
A rising tide lifts all boats, and the younger generation of investors has rapidly changed the wealth management landscape for everyone, including older investors. In Deloitte’s report “10 Disruptive Trends in Wealth Management,” they identify this type of investor as a “re-wired investor.”
This group wants a partnership with their investor that puts them in the driver’s seat. They want to understand the investments they’re making as well as the advice they receive from advisors and use their own research and knowledge to supplement expert opinions. The FINRA Foundation’s study found that 48 percent of investors in their sample who had an account prior to 2020 reported relying on financial professionals when making investment decisions. But, only 23 percent of new investors did so, opting instead to rely on family, friends, and colleagues (38 percent) or data from individual companies they wished to invest in (37 percent).
In order to reach this type of investor, wealth management firms should have client/advisor access through multiple channels, an intuitive, self-directed digital experience, and a variety of advice resources available.
Automation with a Human Touch
Many newer investors eschew the one-size-fits-most in wealth management. Even though younger investors have less net worth, they expect to be given the same options and treated with the same level of personalization as high net worth individuals (HNWI). And fintech and BigTech startups have risen to this challenge by offering a low barrier to entry with an array of value-added services fit for their needs and investment personality.
HNWIs have also found the value in hyper-personalization. According to data from Capgemini, only 26% of wealth management firms see BigTech competition among the top disruptors to the industry. But, “74% of HNWIs report a willingness to consider wealth management offerings from BigTechs.” This is driven by the fact that traditional wealth management firms have yet to seize the opportunity to offer the level of service and personalization that BigTech solutions, like Amazon and Netflix, boast for their clients.
Wealth management firms that can harness data analytics, ML and other analytical tools to deliver tailored solutions and on-demand reporting stand to capture a large market share of new and existing investors.
New investors are zealous and eager for investment opportunities. The FINRA Foundation’s study respondents found that the top three reasons new investors opened accounts were (1) the ability to invest with a small amount of money, (2) wanting to invest for retirement, and (3) the dips in the market that made stocks cheaper. These conditions will continue to draw new investors in 2021 and beyond.
However, the challenge for financial advisory firms will be to recognize the top disruptors driven by new investors that have weaved their way into the expectations and desires for experienced investors and HNWIs. Anticipating these demands to deliver personalized, intelligent, and in-depth client solutions will allow top firms to capitalize on the best that this disruption has to offer.
Thanks to advanced innovation in artificial intelligence (AI), machine learning (ML), and robotic process automation (RPA), repetitive tasks have been automated, lengthy workflows have been streamlined, and previously ambiguous insight into customer’s financial patterns has been deepened. However, many firms have struggled to leverage these new solutions while maintaining a human touch.
Top wealth management firms have achieved a balance between adopting new technology and keeping the advisor connection by utilizing new solutions and technologies in processes that are not client-facing, including data entry, risk analysis, performance analytics and process automation. The approach ensures that clients can access technology’s ease and convenience while having access to an advisor should questions or concerns arise.
Clients Still Crave Human Interaction
Even with today’s rapid digital shift, there are still individuals who prefer a human touch. One survey by Edward Jones found that 83% of respondents preferred working with a human advisor compared to the 17% of those who preferred working with a robo-advisor.
When it comes to money, customers naturally prefer to interact with people because money management is a highly emotional issue. Regardless of how much wealth a client has, an individual’s financial goals and priorities will evolve as they move through different life phases. Because of this, many want to communicate with someone who not only understands these emotions but who has possibly experienced them as well.
For example, during the COVID-19 outbreak, thousands of individuals turned to their advisors for advice on their 401K withdrawals or investment risks. Only a human investor could understand the numbers and the emotion behind the current health and economic concerns.
Additionally, an advisor has the emotional intelligence (EQ) to determine where a client is emotionally. Based on a client’s social cues, they can determine when they are frustrated, overwhelmed, or happy and provide the appropriate human response, be that advice or empathy. As advisors become an integral part of their clients’ emotional lives, a deeper, more trusting relationship is formed. Once this trust has been formed, firms can then turn to data analytics, AI, and machine learning to drive results and value for clients.
Leveraging Technology to Deliver Quality Advice
While many clients feel that having a human touch is important, they still expect wealth management firms to utilize new technology. In the same survey by Edward Jones, 95% of those polled stated they expect financial advisors to use the latest technology and tools as part of the advising process. Firms that utilize AI to analyze financial trends, chatbots for customer service needs and data analytics to understand clients’ needs or the financial markets command a competitive advantage over other firms. Additionally, this new technology increases customer satisfaction as employees can respond quickly to customer concerns.
Analytics, machine learning and AI enable advisors to provide personalized, strategic advice based on the current financial market and clients’ unique needs. Additionally, many of these technologies handle repetitive or mundane tasks, freeing up more of an advisor’s time, allowing them to focus on strategic concerns such as ensuring clients have enough life insurance or maximizing investments.
Finding the Human-Technology Balance
The emergence of AI, big data, and machine learning has revolutionized how wealth management firms do business. These technologies enable financial advisors to streamline workflows and automate business processes and bolster the way they care for clients. Rather than spending most of their time crunching numbers, analyzing financial trends, or entering data, they can spend more one-on-one time with clients, discussing future investments, business opportunities, and other large-scale priorities.
Successful wealth management advisors leverage technological innovation to provide more time for human empathy and relationship building. Achieving this balance ensures that clients get results and offers a human connection where it’s needed most.
New digitization initiatives and changing customer preferences have combined to upend the customer and advisor experience within wealth management. Previously, customer strategy was focused on data points, such as a sleeker, more responsive website or creating more self-service options. However, the focus is now shifting to bridging the gap between the above data points and building an engaging, proactive client-advisor relationship.
Much of this shift is attributed to market disruptions within the industry. Fintech start-ups and an increase in alternative savings vehicles have changed the customer experience on virtually every front—from how wealth is managed and invested to financial guidance. High-growth RIAs have not only recognized changing expectations but embraced them, permanently shifting to provide a faster, easier, and more comprehensive experience.
How Firms Can Respond to Changing Customer Expectations
In the digital age, clients expect to have any time, anywhere access to advisors as well as unrestricted access to a wealth of information. This trend is only expected to accelerate as more digital technologies become available. Furthermore, wealth management firms face the pressures of increasing compliance standards, forcing many firms to reimagine their business processes.
Alongside these factors, data is more important than ever in shaping both processes and the customer experience. Wealth management firms must utilize this data to address market risks and create a fulfilling interaction to stay competitive. However, because most organizations are in the early stages of transforming their digital processes, there is much work to be done. In a report authored by Refinitiv, 46 percent of respondents stated that they were “only partly satisfied or not at all satisfied with their current digital offerings.”
Firms need to bridge this gap and offer a more rewarding client experience by focusing on the following:
- Customization: Gone is the one-size-fits-all approach of the past. Instead, high-growth RIAs are expanding their service offerings to target more specific needs such as income tax preparation, education planning, investment clubs, concierge services, trusts and estates, financing, and more. Ninety percent of wealth management firms that have recently revised their client models for a more tailored, customized approach have already seen success.
- Digitization: In the same report by Refinitiv, 86 percent of respondents rank servicing clients as one of the most important digital capabilities, closely followed by 69 percent who view information access as ‘highly important.’ Some of the top wealth management firms have recognized the importance of digitization and have leveraged the insights and experience from previous solutions to create second-generation solutions.
- Efficiency: Outdated legacy systems and information silos significantly hinder operational efficiency, which, in turn, disrupts the customer experience. In response to this, many firms have turned to automation and building more efficient workflows. However, this is just one aspect of increasing efficiency. Educating both advisors and clients on new processes and tools is needed to ensure a successful efficiency change.
- Data: Data analytics is a huge differentiator for high-revenue firms. Big data companies such as Amazon are experts in using this data to create a holistic, personalized experience for their clients.
- Client relationships: New market disruptions have shifted the focus from products to services with financial planning at the center. Professional development among advisors is increasingly more important among top firms. Clients want to see advisors relying on digital tools and their experience to select the right financial products.
Market disruptions and rapidly evolving customer trends accurately show the challenges firms face today. Many firms (80 percent according to Refinitiv) have increased spending on ‘change the bank’ initiatives to transform their customer experience. Much of this spending is on solutions that increase customer insight and utilize the latest technology to improve decision making and user engagement.
For firms to thrive in this new environment, a well-defined strategy supported by accurate and holistic data and the right tools is needed. Only then can firms provide a customer experience powered by digitalization and the latest industry trends, accelerating their growth for the foreseeable future.
Wealth management firms are undergoing a massive digital transformation. With the litany of digital tools available to potentially solve every problem, some firms have implemented solutions that are a patchwork of solving for individual situations rather than an ecosystem of tools that actually deliver the promised efficiency.
Just as investors are demanding more personalized and integrated experiences from their digital tools, financial advisors and other wealth management professionals, such as back office operations, want the same. Back office professionals want tools that remove unnecessary work from their to-do lists, enhance the client-advisor relationship, and provide transparency and flexibility to build their business as they envision it.
Banishing Silos and Reducing Duplicated Work
Knowledge workers globally, but particularly in the United States, suffer from inefficiencies in their workday. According to research from Asana, coordination or “work about work” consumes nearly 60% of the average workday. Strategy and skilled work lag at 14% and 26% of the workday, respectively. Lack of clarity about job roles and processes increases the number of meetings and check-ins workers endure to complete business-critical tasks. The average worker in the U.S. loses 6 hours and 28 minutes per week to duplicative work or work that has already been completed.
Despite their promises of delivering streamlined and efficient work experiences, the number of apps and productivity tools is holding many professionals back. These professionals switch between 10-25 apps per day, and every time they switch tools or move to another platform, they risk missing actions and messages. Asana’s research indicates that over 25% of workers have missed deadlines and actions because of switching tools and say app overload makes them less efficient.
Integrated tools that minimize switching, create frictionless workflows, and implement automation to prevent duplication are the key to getting financial advisors and their teams back to work efficiently. Tools that communicate with each other and share data, create clear workflows and minimize ambiguity about priorities and job roles.
Augmenting the Back Office Experience
When it comes to advisors, they want digital tools that they can trust to back up their expertise. Rather than having an algorithm dictate daily activities, a platform or software solution should offer support and create an experience that puts them in the driver’s seat.
Essentially, these financial advisors want to provide the transparency and personalization their clients expect and utilizing the right tools can deliver that. However, to do so, these tools must carry some level of customization and make data easily, securely accessible for those who need it.
Finally, platforms should support advanced queries, templates and other tools that offer a combination of automation and customization that advisors can use to save time and give personalized advice to their clients without reinventing processes each time.
As many financial professionals have shifted to working from home or other environments outside the office, disruption and distraction have devoured valuable time. As a result, many knowledge workers have experienced burnout and stress due to constant pressures on their time and blurred lines between work and home.
Retaining and hiring new talent will require wealth management firms to recognize these problems and create processes not only to help their bottom line but to preserve worker wellbeing. This means investing in tools that eliminate duplicative tasks and help solve problems rather than create additional layers of complexity. This will be key to keeping a foothold in a rapidly changing global work environment.
David Knoch is CEO of Docupace a solutions provider focused on digitizing and automating operations in the financial advice and investment industry. David currently serves as the Immediate Past Chair of the Financial Services Institute (FSI) Board of Directors and has been voted one of the 25 most influential people in the Investment Advisory industry two years in a row – 2018 and 2019.
Regulatory compliance continues to be a top priority and cost center for wealth management firms. The preparation for and implementation of Form CRS and Reg BI increased the budget and resources wealth managers spent on compliance activities.
The median implementation cost for Reg BI is $3.28 million, with 54 percent of those costs attributed to technology. Firms focused on choosing and investing in the right digital solution will have an advantage in staying ahead of changing regulations.
Here are some of the early results from Reg BI and Form CRS, what concerns regulators see already, and how financial advisors and home office professionals can adapt their processes to meet compliance requirements more efficiently and build a more reputable relationship with their clients.
Early Feedback from Regulators on Reg BI Compliance
Overall, regulators agree that firms are rising to the challenge of this new rule. Attempts to meet compliance requirements have so far been enough, but that may not last. Soon, regulators may expect stricter adherence to the rules.
The Form CRS continues to be the primary source of problems for firms. Feedback about inadequate compliance includes:
- Links to Form CRS are not displayed prominently and are hidden in links with other documents.
- Forms are written in vague or boilerplate language instead of the plain language the rule requires.
- Firms answered incorrectly or lacked required information in the disciplinary history section, including giving a qualitative explanation instead of a simple “yes” or “no.”
Because of some of these issues with Form CRS, the SEC updated its FAQs and revised their guidance to help wealth management firms meet the requirements and spirit of the rule.
Reg BI Tips for Financial Advisors
Operationalizing Reg BI requirements is a significant challenge for firms. Many firms have had to make substantial adjustments, including but not limited to changing technology, systems, and advisors’ relationships with their clients. Specifically, a Deloitte survey found that 36% of respondents ranked defining best interest as the most challenging operating model change.
Advisors shifting from a simple fiduciary requirement must clearly describe the differences in a transactional and advisory (fee-based) relationship. Using Reg BI as an opportunity to turn compliance into trust can build and reignite client relationships. Form CRS’s essence is documenting the rationale for recommending a specific fee structure and embracing fiduciary advice.
Investors today want transparency, simplicity, clear costs, and communication about fees. Taking the compliance conversation deeper than only meeting guidelines helps investors feel more confident and safe in who they go to for investment advice.
Reg BI Tips for Home Office Professionals
Documented processes are the standard for any compliance program. Documentation is also where firms should start when they consider Reg BI. But, treating Reg BI as merely an extension of FINRA standards is missing the mark. Firms should tailor their compliance and documentation for individual business models.
For instance, written policies and standards should not mirror the written regulations. Reg BI requires that these policies fit their business models, including documentation of alternatives for customers, considering costs.
Cost considerations are a critical component of Reg BI, and the SEC FAQs include special callouts for IRA rollovers. Firms should write these disclosures in language clients understand and explain why they recommend a particular course of action, fee structure, or product.
Finally, conducting a conflict of interest audit can uncover gaps in compliance and fortify documentation for regulators. Firms should review payout grids, product menus, and sales practices and consider each of these factors from the client’s perspective.
When writing policies, firms must identify and disclose all conflicts of interest and mitigate any conflicts that might put their interests above the client’s interests.
The regulatory burden on wealth management firms is a significant cost center. Taking a holistic approach to compliance, considering the customers’ perspective, and seeking to build trust and a partnership with clients is key to not only meeting but exceeding regulators’ expectations for Reg BI compliance.
COVID-19 has forced many businesses to adapt and even rethink their business models. The traditional ways of doing business, such as in-person meetings and physical document exchanges, have been replaced with Zoom meetings and digital signing.
As wealth management firms prepare to return to a new normal, digital tools will become a key part of meeting client expectations. While many organizations had implemented some of these tools, the pandemic drove adoption and implementation dramatically. And, as younger generations begin to amass more wealth — Millennials are set to inherit nearly $68 trillion by 2030 — they’ll expect solutions that are personalized and digital.
To compete in the market post-COVID, many organizations have optimized their operations for the digital world to capitalize on the massive growth and valuation opportunities that lie ahead.
Digital Companies Create M&A Opportunities
According to Financial Advisor IQ, the year 2020 saw a record number of mergers and acquisitions, up 20% from 2019. Of 159 total deals in 2020, most transactions occurred in the second half of the year. Wealth management firms that transitioned to digital workflows gained a key advantage over their competitors: agility. This agility is crucial for M&A activity. Whether you are a buyer or a seller in the M&A arena, your speed to market and ability to react to market trends, changing conditions, and (especially) disasters can be a determining factor in your valuations.
2020 also saw an increase in deal sizes, where the average valuation of acquired firms is said to have reached $1.7 billion. As the dollar figure of deal sizes rise, firms that effectively leverage digital solutions are in pole position as both buyers and sellers because of an increased ability to onboard clients, manage documents, and automate transactions.
Optimizing operations for more digital services removes the hassle of paperwork and manual signatures from investors and advisors, creating a more satisfying and productive wealth management experience that can be completed faster than ever before. All this adds up to more profitability and higher valuations, which puts you in a better situation whether you are buying or selling in the current M&A arena.
Digital-Ready Firms Are More Disaster Proof
The global pandemic taught businesses that their reliance on a physical location is dangerous to their future. In 2020, many firms were severely threatened by COVID-19 restrictions because they could not access physical files in their offices or meet with clients in person. In a PWC survey, concerns about COVID-19’s impact on workforce conditions and productivity was a top concern among wealth management firms.
Firms that transition to digital operations through a secure platform can access client data and work with clients, regardless of their physical location, putting their minds at ease and keeping business moving during an already turbulent time. This added resilience and flexibility adds value to a firm by making them less vulnerable to physical threats posed by elements, disasters, and data breaches.
As the world continues to recover from the current pandemic and enter a new normal, firms that operate digitally reduce their recovery time while increasing their ability to empower advisors and investors alike.
Digital Firms Win the Talent War
The wealth management industry is also experiencing a shortage of talented younger advisors and increased competition for competent professionals. In 2018, the Retirement Income Journal estimated that less than 12% of financial advisors were under 35. Younger professionals are proficient with technology and can be attracted to industries with more innovation and disruption.
The digital transformation of wealth management operations gives firms yet another advantage because they extend their reach. When a firm is not tied to a building or specific location, they widen the talent pool to a global audience. Advisors feel supported no matter where they are and can provide top-notch service to clients as if they were in an office. By removing the barrier of physical location, firms also open themselves up to new clients they would have otherwise missed out on, which adds diversity and quality to their portfolios.
The COVID-19 pandemic has accelerated the digitization of wealth management, and many firms have made changes in months that were predicted to take years to implement. With the coming volatility and uncertainty in the economy, many clients are looking to their advisors to weather the storm and find stability. Offering solutions that meet clients where they are and flexibility to keep business moving during periods of anxiety will set firms apart and provide opportunities to serve their clients better than ever.
Ryan George is the Chief Marketing Officer at Docupace. He is responsible for the company’s brand awareness, early-stage sales pipeline, content strategies, customer and industry insights, internal and external communications, design, and events. George actively engages in leadership roles in both the financial services and marketing communications communities. He a member of the Forbes Communications Council, an invitation-only, fee-based organization of senior-level communications and public relations executives, the CMO Council and the CMO Club.
Women’s share of global wealth has outpaced the market and continues to be one of the largest growing sectors in the U.S. economy. According to research from McKinsey, “By 2030, American women are expected to control much of the $30 trillion in financial assets that baby boomers will possess—a potential wealth transfer of such magnitude that it approaches the annual GDP of the United States.”
Women also continue to make big strides in leadership positions, occupying some of the highest financial management positions, including the Treasury Department.
While women have changed the game in global wealth, the wealth management industry has lagged in serving them and understanding their needs and goals. Even though startups and fintech investors are beginning to snatch up these clients, there’s still an opportunity for traditional wealth management organizations to pivot to include women in their list of potential clients.
Understanding Gender Differences in Investment Styles
Women have long been a driver for household economics. According to a study by Merrill Lynch, women feel just as confident as men in tasks such as budgeting or paying bills, but that confidence wavers when it comes to investment. Only about half (52%) of women say they are confident in managing investments.
While women tend to invest less than men, when they do, their investments are based on the values that matter most to them: family. Merrill Lynch’s study found 77% of women view money through the lens of what it can do for their families. Women are also drawn to impact investing and choose causes that matter to them.
Women’s investments tend to be more deliberate, diverse and agile than men’s investments. As a result, their returns are higher. A Fidelity Investments analysis of client data showed, on average, “Women performed better than men when it comes to investing by 40 basis points, or 0.4 percent. At first glance, this may appear to be a minor difference, but can have a significant impact over time.” While men tend to “swing for the fences,” women are content with a string of singles.
To attract and be effective with women investors, wealth management providers should embrace new ways to deliver information, offer more diverse advice providers, and above all else, listen to and understand women’s wealth goals.
Younger Women Are Showing Improved Financial Literacy
Younger women, in particular, take a more active role in building wealth. A survey from BCG showed “70% of millennial women (those born between 1980 and 1995) said that they take the lead in all financial decisions, compared with just 40% of female baby boomers.” Millennial women have more formal education than previous generations, and they’re participating in the workforce in greater numbers than their parents and grandparents.
As women in younger generations age, they continue to amass and concentrate their own wealth. According to BCG, “From 2019 to 2023, North America will continue to have the largest concentration of female-owned assets, with women’s wealth in the region projected to rise at a steady CAGR of 6.9%, although this rate is slightly lower than the anticipated global average of 7.2%.”
Wealth management providers should recognize this changing dynamic in younger generations and seek out ways to meet their needs and how they might differ from other clients.
Building a Culture/Service Model of Inclusivity
Effectively reaching women is about more than recognizing their share of capital. Wealth management professionals will need to see women as individuals rather than a single group with the same goals and strategies.
BCG notes that offering plenty of information and options puts the power into women’s hands to make decisions they can trust. “Recognizing the importance of data, leading advisors will use visualizations, simulations, and analytics to help women reach informed decisions. Dynamic tools that make it easy to evaluate different scenarios can enable women to see how they might put a portion of their cash and deposits to more productive use while preserving the liquidity they need.”
Building a culture of inclusivity doesn’t happen by accident. It is a deliberate, thoughtful process. Wealth management providers that offer a diverse offering of investment advisors and take a client-centric approach to investment will be poised to take advantage of the significant financial footprint that women investors offer.
Judie Endemann is Head of Operations at Docupace. Judie has supported executive teams through a variety of growth cycles, from early-stage startups to publicly traded international companies. Prior to joining Docupace, she served as VP of Corporate Services for a global digital media technology company. It was there that, in partnership with the executive team, she designed an acquisition strategy that led to the purchase of a division of a multi-billion dollar, publicly-traded company.
Wealth management’s technological shift is happening on multiple fronts. Firms are investing in new technologies while simultaneously scaling their existing systems and integrating outsourced solutions to create a more holistic and dynamic client experience. The rise of robo-advisors, artificial intelligence (AI) and machine learning (ML), and transparent, flexible dashboards offered by fintech startups have pushed traditional firms to adapt and innovate if they want to catch the interest of younger investors.
Spending on cloud-base solutions accelerated dramatically in the early months of the COVID-19 pandemic as many organizations scrambled to implement remote working solutions or scale up what capabilities they already had in place.
While the pandemic can’t end soon enough, this trend upward will be around a while, according to Gartner. Cloud solutions are projected to make up 14.2% of the total global enterprise IT spending market in 2024, up from 9.1% in 2020.
A Thomas Reuters survey last year showed 68% of respondents looked to implement new technology to stay nimble in the “new normal,” and 69% of participants said they are hoping technology developments will keep their firms relevant in the short and long term.
As wealth management firms address these issues and other challenges facing them in 2021, here are some trends to consider as you evaluate and invest in new technology.
Technology Spending is On the Rise in the Advice Industry
Wealth management firms across the industry view technology as vital to success in the digital world. Leading voices like Fidelity and Goldman Sachs are competing heavily for the best tech talent as they implement blockchain, AI, virtual reality and other technologies to anticipate the needs of customers before their competition.
According to InvestmentNews, “the median year over year increase in tech spending was 15.8%, for an average of $120,309, an all-time high.” It is anticipated that this trend will continue at an accelerated pace, as experts predict annual technology spending across the financial services industry will reach $24 Billion by 2023.
What do the Executives at these name-brand companies understand best about technology? That it’s not just a tool, it’s a strategic advantage. This is why the industry leaders put a decent chunk of their revenues right back into enhancing their technology stack. InvestmentNews reports that firms spent a record 3.69% of revenue on technology.
Investment is Focused on Efficiency Gains, Enhanced Experience
Investing in software and tools that improve processes empowers advisors to use their time more efficiently, focus on more strategic matters, and perform at the highest level. Technology investment only works if it improves the way a firm operates.
InvestmentNews reports that wealth management firms look for technology that streamlines processes, automates workflows and helps them better serve their customers. This operationalization strategy pays off, too; according to FinancialPlanning, automating workflows can help financial advisors close deals 25% faster.
On the other side of the “virtual” desk is the customer experience.
Investing in technology that enhances the customer experience helps firms attract newer, younger investors and keep them coming back. Wealth management firms with enhanced digital experiences gain advantages over competitors, including:
- Accurate and hassle-free onboarding through paperless systems
- Improved ability to manage important documents
- Seamless transitions between advisors through automated workflows
- Increased confidence in their ability to maintain Reg BI compliance
Cybersecurity Remains a Top Concern
As wealth management firms incorporate more digital operations into their strategies, cybersecurity remains a top concern among advisors and investors. In 2018, 20% of the cybersecurity events reported to the Financial Conduct Authority in the UK came from financial services firms.
With breach events consistently making headlines for several years now, anxiety across the industry has steadily risen — 66% of advisors say that cybersecurity will be a top concern over the next few years, according to InvestmentNews research. While wealth management firms may not physically hold their client assets under management, they are legally required to collect and store vast amounts of information for all clients, making them a potential target of the bad guys.
As many firms shift into their new normal and uncertain markets, they’re taking inventory of their technology and seeking solutions that support a remote workforce and clientele, optimize costs, and provide a launchpad for innovation.
Patrick McMahon is Executive Vice President – Enterprise Business Solutions at Docupace. Patrick is an experienced sales leader who works with C-level executives and business owners to execute digital transformation programs and modernize operational processes. In his role, Patrick has helped many organizations, both large and small, in the investment and financial advice industry realize their true potential by moving to the cloud and streamlining their digital processes.
When in-person workplaces shut down in March 2020, cloud computing kept businesses moving. Without the ability to manage tasks, documents, data, and other essential services remotely and in the cloud, businesses could not have supported millions of workers from their home offices and living spaces while also maintaining global supply chains and critical business motions.
Microsoft reported that two years of digitization progress was achieved in two months with “more than 200 million Microsoft Teams meeting participants in a single day, generating more than 4.1 billion meeting minutes.”
Wealth management firms that moved quickly to digitize operations found opportunities to reach new clients and interact with them in more personalized and streamlined ways. Those who had traditionally resisted embracing cloud technologies or lagged in funding them found themselves scrambling to adapt to changing health guidelines and local government restrictions.
Cloud Growth Trends
Even as many teams plan to return to the office in 2021, the demand for cloud solutions will increase. According to research from Forrester, the global public cloud infrastructure market will grow 35% to $120 billion in 2021. Cloud solutions will no longer be nice-to-have features, but an essential part of doing business in all markets.
Forrester also predicts that 30% of firms will continue to accelerate their cloud services spending in 2021. This additional spending will be particularly useful for firms looking to edge out their less nimble competition.
But, the move to the cloud isn’t a one-and-done task; it’s a journey. The pandemic has accelerated this journey and fast-tracked a few years of growth in a matter of months. While the pandemic spurred quick action to move some essential operations, it will be up to business and industry leaders to continue this business model transformation and keep pace with the market’s competition and expectations.
McKinsey estimates that: “more than 20 percent of the global workforce (most of them in high-skilled jobs in sectors such as finance, insurance, and IT) could work the majority of its time away from the office—and be just as effective.” Reopening in-person offices and conducting client meetings will not go away completely. However, many analysts believe business travel may not return to 2019 levels until 2024, meaning virtual meetings may be the norm.
Digitizing the Customer Experience
Marketing and customer service will go hand-in-hand for firms in the future, and those improved customer experiences will be cloud-driven.
Allowing clients to lead the conversation about how and when they’d like to engage with their advisors has vast potential to improve how customers feel about their wealth advisors and what they can accomplish with digital tools. According to Oracle, brands that integrate customer experience in their digital transformation experience “10.3 times annual increase in customer satisfaction rates.”
One of the key ways to build a cohesive, customer-centric experience is to lean into integrated and cohesive data systems. These systems allow firms to understand a client’s journey and interactions across many platforms and not get bogged down by piecemeal, siloed solutions that don’t share critical data in real-time.
Avoid Becoming a Laggard
Organizations unwilling to invest in the digital infrastructure and tools in favor of a more paper-driven approach found themselves unprepared to deal with the upheaval of 2020.
In our whitepaper, “Wealth Management’s Digital Future: The Experts Weigh in,” Docupace CTO Ron Wallis says, “I believe 2020 will be viewed to be the single most transformative year for the digitization of the financial services industry. We’re seeing, and will continue to see, a very accelerated adoption of digital processing, especially among firms that were previously considered late adopters.”
Firms that do not embrace digitization will be outstripped by competitors that offer the benefits and experiences clients expect. Younger investors want their relationship with their advisors to be integrated and as simple as interactions on their phones.
And for those firms that insist on sticking with the old ways? According to Wallis, “Laggards that don’t embrace a completely immersive and collaborative experience for the client will drive consolidation in the industry. They’ll get bought up or squeezed out by the leaders that do fully embrace these technologies.”
While some technologies and methods may become obsolete due to wealth management’s migration to the cloud, the opportunities for a wider and richer market are available for firms that move quickly to embrace it.
Customer expectations are sky-high when it comes to onboarding. Digital services in other sectors — specifically from brands like Amazon and Netflix — have primed customers to expect seamless experiences that look and feel effortless. (more…)