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September 07, 2023

Sustainable Innovation at scale: Journey for Wealth, Banking and Asset Management in this Decade

Roger Portnoy


Reading time: 5 min


Sustainable Innovation has emerged as a cornerstone that not only drives economic outcomes but also addresses the pressing social and environmental challenges of our times. Rooted in the principle of creating positive economic outcomes while generating long-term social and environmental benefits, sustainable innovation has become imperative for organisations striving to thrive in a changing world and it is increasingly recognised as a key pillar that creates shareholder value, while reinforcing client loyalty and open dialogue. But where does the story begin?

Sustainable Innovation needs to be personalised to clients needs in a compliant way…

Fair to say, it starts with an almost mandatory requirement to personalise to meet clients’ needs in a compliant way. As we look ahead, a staggering 40 trillion dollars of wealth is poised to emerge from the younger generation of wealth accumulators. It’s imperative to recognise that their desires and needs differ significantly from those of baby boomers and silver surfers, who are yet still very much part of the client base. Notably, these older clients are not fading away; they are living longer and expecting more comprehensive services to maintain their lifestyles. Therefore, wealth managers are faced with the dual challenge of meeting broader client needs while ensuring compliance. What’s fascinating is that this challenge often involves catering to multiple generations within a single family. Consider the future wealth manager as someone who may be dealing with up to four generations simultaneously. This is the new reality of our industry. To thrive in this evolving landscape, understanding and effectively serving these diverse client profiles will be the key to your success.

…and should address new solution design through a multi-faceted innovation model

It’s therefore crucial to grasp the profound implications of what this means. The future demands innovation in solution design because the clients we’ll serve won’t adhere to traditional norms that have persisted for centuries. Client perspectives on wealth generation have undergone a seismic shift. We are witnessing the democratisation of assets across the board; virtually every asset can now be accessed in some form, albeit with a level of complexity. This is the path ahead, and it necessitates innovation if we aim to cater to diverse clientele – from baby boomers to millennials and Gen Z.

When it comes to client expectations, both current and future, there are indeed some clear trends emerging: wealthier clients want your organisation to adopt broader exposure and access to illiquid and marketplace assets, while less affluent clients want your organisation to help them participate in the democratisation of alternative assets. All clients desire service delivery that predicts, anticipates, and fulfils outcomes on demands. Building trust with clients now requires a more social and peer-engaged approach, moving away from authoritative methods. F2F authorisation and decision-making events are evolving into virtual experiences, offering secure, reliable, and seamless interactions. Eventually, firms need to create, manage, and consume data and services through new investment gateways and communication channels.

… while adhering to a tougher new innovation leadership mindset

Leadership is marked by a profound shift too. In recent years, we’ve transitioned from “stop experimenting, start delivering mode” based on the assumption that the ability to deliver isn’t just a competitive advantage; it’s a matter of survival, and organisational leadership does place innovation at the forefront, but only if it aligns with the imperative to deliver.

For many of you, this means that your primary objective moving forward will revolve around innovating to better serve your existing clients. Achieving this demands the development, execution, and maintenance of superior skills in rationalisation, integration, and data/process migration. To truly drive long-term innovation, consider adopting a strategic approach that focuses on sustainability across your organisation through initiatives that are easily understandable and measurable.

At the end of the day, sustainable innovation should be geared toward achieving four key objectives, that are ever-present, now and in the future:

  1.  Lower Middle and Back Office costs while improving scale;
  2.  Accelerate growth through higher asset flows connected to sustainable and recurrent fee models;
  3. Boost Performance and Flexibility to broaden appeal and visibility to specific demographic cohorts;
  4. Widen Resilient Distribution channels to centralized solutions.

Innovation Lessons: Do’s & Don’ts

Embarking on the path to sustainable innovation is an exciting journey, but it’s not without its challenges and risks. Innovation programs often stumble and fall when organisations:

  1. Reinvest in Legacy Process & Workflow: to foster innovation, it’s crucial to break free from the constraints of outdated processes and workflows but rather embrace new thinking and adapt to a fresh approach.
  2.  Ignore maintaining a project risk register: Innovation inherently involves risk, and failing to create and maintain a comprehensive risk register can lead to project performance issues and ultimately project failure. Recognizing and managing these risks are paramount to success.
  3. Underestimate Change Management planning: we all think that when we build great tech, we deliver wonderful service, we implement cloud, voilà, all of you become users! But the reality is a small number of you become users and the rest of you become adopters over many generations of usership. Why does that happen and why does it lead to ineffective outcome? Because you don’t invest in change management. You need to start your project on a change management philosophy.

But there are ways of addressing these to achieve success. Innovation programmes can deliver great results when organizations:

  1. Play to their firm’s strengths during the design stage
  2. Build ROI metric on multiple levels beyond purely financial metrics
  3. Share risk with partners who understand their business
  4. Innovate incrementally based on OKRs
  5. Apply continuous quality assurance

Opportunities in this decade

As we look ahead, it’s imperative to discern the fundamental themes propelling our journey towards innovation. First and foremost, data reigns supreme. The sheer volume of information at our disposal is unparalleled, and harnessing its power will be pivotal. Data is not just the new currency; it’s the cornerstone upon which future wealth management strategies will be built. Digital assets have firmly entrenched themselves in the financial ecosystem and are here to stay. Artificial Intelligence will “at last” play a significant role in providing scale, personalisation and consistency. Open finance will connect ecosystems to support holistic advice for everyone and finally, in the quest for success, a steadfast commitment to sustainability is non-negotiable. A decade from now, the risk landscape will be predominantly sustainability-focused.

At Objectway, we’ve built the Innovation Diamond framework to foster collaborative innovation with our clients. This framework empowers us to run their innovation programmes with a multi-faceted approach, offering inspirational leadership that fuels continuous discovery and execution. We cultivate innovation through a service mindset and leverage data and ecosystem resources to craft unique insights that drive the evolution of solution design.