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New study reveals the three pillars for wealth managers to unlock opportunity in challenging times

17th November 2023 – Investments in complete digitalisation, customer experience innovation and ESG offering are the cornerstones to meet the challenge of current market conditions. Roger Portnoy, Objectway Chief Strategy Officer, delves into Objectway and GlobalData joint research in latest issued Pimfa Journal.

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Regulation and competition are putting increasing pressure on financial firms of all dimensions. However, priorities and intensity of the innovation projects depend heavily on the size of the company.

In the current rapidly changing environment, banking, asset and wealth management are playing a catch-up game, having previously been conservative and reluctant to innovate.

The financial sector in Europe is undergoing a profound transition. The war in Ukraine, high inflation and the threat of recession have put pressure on the profitability of players. According to the study commissioned by Objectway to GlobalData and designed to gather the industry’s views on the key challenges facing the European banking, wealth and asset management industry, over 52 percent of the surveyed firms intend to tackle full-spectrum digitisation projects within the next two years in order to remain competitive, while more than 40 percent are already working on innovative concepts for their customer experience.

The study, in fact, shows that despite headwinds, the industry has not cut back on its transformation efforts: banks and wealth managers increased their investments in technology by 8.5 percent last year and will probably increase them by a further 9.2 percent by the end of 2023. Increased competition between players, the challenge of digitalisation and the ability to then guarantee the results of investments are the biggest challenges. A lasting relationship with increasingly demanding customers is then a key factor. When it comes to the strategies for improving customer experience to retain and increase clients, artificial intelligence (AI) is the subject matter, with almost 50 percent citing AI and machine learning as the biggest changes over the next two years.

A clear majority, almost 70 percent, also believe that ever-increasing regulatory pressure is forcing firms to continuously question and adapt their business model. In light of the recent financial turmoil, the call for stricter international regulation is inevitable. Investor protection and environmental concerns are increasingly becoming priorities for regulators in Europe. And whilst the extent of the changes is uncertain, they are expected to create a number of additional costs for, say, administration and legal departments. Therefore, a shift to more efficient, digital and technologically advanced business processes will be necessary.

Additionally, changing customer expectations regarding sustainable investments make technological progress inevitable for the financial sector. And when it comes to innovation in terms of offering, ESG investments take the absolute lion’s share.

Across the industry, 84.5 percent plan to add or expand their ESG investment offering in the next three years – headed by Private Wealth at 97.2 percent. In this regard, there are several ways to develop or sharpen an ESG-compliant profile. Creating new investment solutions is the most common response to changing investor priorities, according to 73 percent of respondents. Other important means of developing an ESG brand include asking clients about their ESG views (64.7 percent) or providing additional support and resources for financial education (48.5 percent).

Regardless of the company’s priorities, the research underlines how any successful strategic innovation requires a coordinated approach and shared goals among all stakeholders. More and more companies are recognising the benefits of having an ecosystem of fintech and wealthtech partners and are outsourcing aspects of their business. In doing so, they are creating new opportunities for growth while reducing the cost and complexity of administrating the different aspects of such aspects. Flexibility is the top reason for outsourcing an innovation project: this is especially true in large companies (47.6 percent) that have internal resources but do not want to use them exclusively for what could be a critical modernisation. The other key factor, at around 40 percent, is clearly cost, especially for smaller companies, for which is usually not cost-effective to develop software internally.

As such, the industry has been responding to challenging conditions with an escalating program of investments in innovation, within a framework which includes the most critical thematic areas that will help financial service players to successfully target their digital transformation journey: end-customer experience, offering design and the overall target operating model.

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By leveraging this innovation framework, financial institutions get concrete benefits across their entire value chain.


Roger Portnoy

Chief Strategy Officer Objectway