There has been a 7 to 10 fold increase in digital engagement in wealth management business during the pandemic and this is set to continue into the next normal. Clients are demanding more from digital interactions and 75% are more likely to engage more with their wealth managers as technology improves. Almost 8 out of 10 firms are currently making changes to their digital agenda for the next normal. Their main drivers are to improve operational efficiency by providing services in a more cost efficient and scalable way, and to attract and retain clients by using digital as a differentiator and increasing client engagement along the entire client lifecycle.
More efficiency for operations
Although the average pre-tax profit margin for the sector is a respectable 23%, there are huge variations and 1 in 3 firms make less than 10% and/or are loss making. A major contributing factor is the significant variation in operational efficiency. Indeed a lack of efficiency and the ability to scale are major obstacles for wealth managers. The vast majority of firms are not scalable and rely on legacy systems that do not communicate well with each other, therefore resulting in many manual workarounds and cumbersome processes, which are error prone. For example, reporting and onboarding often require physical intervention at various stages and are time consuming. Reporting was highlighted as a key differentiator for clients and this is only expected to increase in importance due to ESG investing.
Digital to stand out from the crowd
Onboarding a client takes 4-5 weeks on average, but some firms can onboard him/her in less than 5 days. This is also seen as a very important touchpoint by new clients and will impact their perception of the firm and their likelihood of making referrals.
Wealth Managers are at various stages of enacting their digital agenda, but they generally agree on their most important immediate priorities, such as enhancing digitalisation to support the front office and client lifecycle management, as well as updating or changing their legacy systems. This is closely followed by automating areas around regulation and providing better client communication tools.
Far from Heaven
Wealth firms also agree that meeting their desired conditions will be a real challenge. Implementing change is not easy and requires (amongst other things) a partnership approach from vendors – whereby wealth managers can leverage from the technology roadmap and implementation expertise of the vendor(s), experienced resources who are able to add value on the project board (as well as have time to manage their own ‘day jobs’). Of course, it can also be expensive especially if the projects are not well defined and well managed.
As one COO mentioned of their ideal state: “We want it to be as easy as doing your shopping on Amazon”…. Firms are still a long way off from that.
These and other concerns and opportunities will be discussed in an exclusive C-level roundtable hosted by Objectway and Compeer, to understand and shape the digital agenda for the next normal of UK wealth management firms.
In our next installment we’ll discover the findings that will have emerged.