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When we talk about digitization, we have a funny way of making it sound like a far-off future state.
But digitization isn’t a goal, it’s a process. It’s been happening for years in fits and starts — with email, digital account opening, esignatures, etc. — but it’s been an uphill battle.
Progress has always been dampened by organizational inertia, regulatory challenges, and the simple question of whether digitizing was worth the time and money.
Then came COVID-19.
Suddenly, digitization went from being a header on the business plan to a reality of day-to-day work. Firms and advisors that had invested in digitization made the transition to remote work relatively gracefully, while those who hadn’t were forced to rapidly adopt digital solutions in order to continue operating.
Now, as we examine the future of digitization in wealth management, we do it through a new lens. It’s no longer a matter of if, but how, and how fast.
To find out, we asked 11 financial services and financial technology leaders to weigh in on the biggest questions surrounding digitization and digital experiences in wealth management.
Meet the experts
David AmbricoVP, Enterprise Sales Docupace
Luke BaumgartenCOO Harvest Investment Services
Diane BuckleyDirector, Strategic Alliances Docupace
Theresa FanningChief Operations and Compliance Officer Clarus Wealth Advisors
Wayne GilpinSVP, Global Partnerships Vestmark
David KnochCEO Docupace
Kevin LaraiaEVP, Enterprise Sales Docupace
Bridget McNamara- FenesyPresident & CEO M Holdings Securities
Michael PinskerFounder and President Docupace
Ron WallisCTO Docupace
Chris MillsEVP Kovack Securities
COVID-19: an unwelcome catalyst for digital transformation
There’s nothing like a storm to put some wind in the sails of a slow-moving ship.
The coronavirus pandemic has rapidly accelerated the timeline for digitization, forcing firms that were only just starting to think about digitizing to actually adopt digital processes. Solutions like videoconferencing, digital document management, and automated account opening took an overnight leap from “nice-to-have” to “critical importance.”
Not every impact of the pandemic will be lasting, but our experts predict that technologies and policies that facilitate remote work for back-office employees and remote client interactions for advisors will stick around in a post-COVID world.
A glimpse into a formless future
At the most literal level, “digitization” just means creating a digital version of a physical object. Using a computer to help you fill out and send digital copies of paper forms comes with a lot of benefits. But at the end of the day, the foundation of the process is still paperwork.
According to our experts, the next phase of digitization in the wealth management industry will be digging up and replacing these paper foundations, creating truly formless processes on both the front and back ends.
It’s going to take a lot of work (and a lot of cooperation from regulators), but the technology is already here — and the benefits will be enormous.
Our experts identified these lesser-known obstacles to digitization in the wealth management industry:
Lack of data standardization
Lack of integrated solutions
Aging advisor population
Legacy processes in insurance
Unintended consequences of regulations
Lack of financial literacy
Reduced respect for advisors
Wealth management technology is better together
Wealth management is an inherently collaborative industry; wealth management technology is not. At least, that’s been the story until now.
Most of our experts agree that the key to unlocking true digital transformation (as opposed to piecemeal digitization initiatives) is the integration of solutions.
In the next few years, the most effective and successful financial services technologies will be platforms, not individual applications.
Robotic process automation
Robotic process automation (RPA) is poised to dramatically alter the day-to-day roles of wealth management professionals. As time-consuming legacy processes get replaced by automated services, there will be a shift in focus from paperwork processing to relationship management.
This technology has the power to improve margins by reducing processing costs, as well as to improve the investor and advisor experiences by reducing the time it takes to complete essential tasks like new account opening.
Who’s responsible for driving digitization?
Viewed from the macro level, digitization seems like an inevitable force of nature. But when you zoom in, it’s driven by individuals demanding change and making decisions.
We asked our experts where the responsibility for digitization lies. The answer? Everywhere.
Technology providers need to develop effective solutions, broker-dealers need to make them available, users need to adopt them, partners and processors need to accept them, and regulators need to allow them.
Until there’s cooperation and shared vision between all parties, the digitization process will continue to be fractured — and frustrating.
What will happen to advisory?
The pressure to digitize comes, in part, from investors. They want their wealth management experiences to be just as simple and convenient as the digital experiences in all other parts of their lives, from online shopping to paying bills.
Of course, if an investor can control all their accounts from an iPhone app, that raises questions about the future of advisory services.
Is digitization going to make financial advisors obsolete? Possibly. But one thing’s for certain — not digitizing in the face of mounting pressure isn’t going to help.
And in the eyes of some of our experts, digitization is only going to make the relationship between advisors and investors better.
AI has the potential to reduce the value of proprietary wealth management insights. But it can also be used to supplement traditional advisory services and add value for the investor, as well as to make back-end systems and processes more efficient.
What about firms that don’t digitize?
Our experts agree that for the majority of the industry, digitization is only a matter of time. But there will inevitably be firms that never adopt digital solutions, and advisors that stubbornly refuse to use them.
What’s the outlook for these organizations?
With the changes in demographics and consumer preferences facing the industry, the path forward for non-adopters will become increasingly narrow. According to our experts, digitization will become a requirement for growth, and firms that don’t digitize will be left behind or bought up by those that did.
Our experts believe these things will be completely obsolete within the wealth management industry by 2030.
Wet ink signatures
There are many reasons why some firms still resist digitization. It’s expensive. Investments in digital solutions don’t always pay off. It may render some job roles obsolete.
But as challenging as the process might be, the truth is that it’s no longer optional. The impending mass transfer of wealth to millennials and Gen Z, combined with those generations’ desire for digital experiences, means that remaining competitive requires going digital.
And as the coronavirus pandemic has shown us, change isn’t always predictable. The world can transform rapidly, and success demands flexibility. Digitization will play a key role in helping firms and advisors achieve that flexibility.
It’s true that late adopters may find themselves with an advantage. They can start with a blank slate and select from the best, most battle-tested technologies in an increasingly competitive marketplace.
However, as the years tick by, “waiting and seeing,” will become a less and less viable strategy. The time to digitize is now.
Docupace is a leading digital operations technology provider that simplifies how wealth management firms process and digitize data, increasing efficiency, productivity, and profits. With the secure, cloud-based Docupace Platform, the Docupace team provides a suite of digital solutions that helps broker-dealers, RIAs, and their advisors streamline and automate client onboarding, document management, advisor transitions, Regulation BI, and other critical workflows while maintaining SEC and FINRA compliance.
With headquarters in Los Angeles, California, Docupace is proud to serve a variety of firms, including some of the largest in the financial services industry, through a combination of proven technology and hands-on service. For more information, please visit www.docupace.com.
Docupace can help you accelerate digitization.
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