As a result, major banks and institutions are discovering the need to adapt to the new tech-dominated world.
The realisation and adoption has been slow and anything but painless, and the industry lingered in a pre-digital state for a long period. However, it is starting to make up for lost time, forced by both consumer expectations and the emergence of young fintech firms and challenger banks.
In wealth management, however, the attitude towards technology has remained stagnant, with firms serving wealthy clients boasting bespoke solutions and an individual approach as their unique selling point.
In addition, many companies saw tech-heavy services as something of interest and relevance primarily to younger generations, one forming a relatively small proportion of high net worth clientele.
Furthermore, technological change requires a major transformation of operational models and comes at a great cost – an expenditure most firms could not justify.
Financial services is no exception
In today’s landscape, these views are out of date.
For the most part, we all use the same technology delivered via the same platforms and devices across the globe, regardless of wealth status.
Accustomed as we are to intuitive and reactive services of digital platforms, such as Amazon and Netflix, we now expect this seamless digital experience to be replicated everywhere – and financial services is no exception.
In the wealth management industry, the client experience in today’s market cannot be met with human advice alone, no matter how personalised.
This is not to say that advanced expertise offered by investment specialists and wealth managers is somehow obsolete or out-of-date.
On the contrary, especially when considering current levels of market volatility and the slowing of major economies. Knowledge, experience and bespoke advice have always been, and continue to be, paramount.
However, as human expertise alone can no longer suffice, firms that do not consider the opportunities technology has on offer will be squeezed out in the near future.
Keeping a human touch
The concept of bionic wealth management is a hybrid approach that combines wealth managers’ use of cutting-edge technology with traditional advice on more complex, client-specific matters.
The term ‘bionic’ implies that advisory service is empowered and supported by the use of technology, helping firms provide a better user experience to increasingly demanding clients, as well as improving the operational efficiency of their business.
A bionic model offers a better digital experience, more relevant client interactions, and the potential to deliver a more comprehensive service covering multiple assets and products on a single platform.
It allows advisers to focus on what they do best – provide the personalised human touch.
Better, stronger, faster
When exploring the main benefits on offer from adopting a bionic approach, three categories stand out:
Improve investment offering: Technological innovations including AI, big data and cloud computing could help firms develop new ways to conduct market analysis, build advanced stock screening tools and enable firms to evolve from a traditional asset allocation framework to a more dynamic and risk-controlled methodology. Furthermore, it can support investment processes in real-time and help guide decisions in the midst of uncertainty. Ultimately, technology can help advisers to invest smarter and invest better.
Boost operational efficiency: The range of technologies that can make wealth management ‘bionic’ include robotic process automation, use of connectivity and APIs and, potentially, blockchain and smart contracts. If properly harnessed, they can allow for a new generation CRM and compliance solutions, and a seamless user experience across many different and interconnected services.
Outsource solutions for non-core activities: In today’s market, firms are able to partner with multiple providers, including young and agile fintech players. It becomes increasingly easy to pick and choose the most appropriate and efficient solutions to increase service quality and improve processes, without the associated costs of developing this in-house. Hosted and cloud-based technology can be most fitting in specialised areas such as cybersecurity, or well developed and widely available products. Whereas activities such as investment advice and client data are best kept in-house.
In conclusion, greater use of technology for wealth managers can no longer be considered an option.
Firms have a lot to gain if they approach this in the right way and everything to lose if they don’t, as customers would not hesitate to switch their financial services provider in exchange for a better digital experience.
By moving slowly, firms stand to lose $79.2m (£60.3m, €70.5m) per billion dollars of revenue a year, according to Wealth and Asset Management 2022 Roubini Thought Lab, 2017.
But digital laggards may pay an even bigger price: falling out of the race altogether.
This article was written for International Adviser by Denis Nagy, chief executive of London-based investment management firm Dolfin.