The wealth management industry must see the emergence of more disruptive technologies, innovations that give enlightened firms a true competitive advantage and end-users something that better fits their changing needs, this article says.

The wealth management industry must see the emergence of more disruptive technologies, innovations that give enlightened firms a true competitive advantage and actual clients something that better fits their changing needs, writes Steve Young, CEO, Citisoft, the consultancy. The views expressed here are not necessarily shared by the editors of this publication but we are very pleased to share these insights and invite readers to respond.

The level of innovation from the technology providers in our industry is poor, and bears little or no comparison to what is being seen in other markets. The continuing emergence of cloud and web based technologies is transforming the speed of change and I think we will also see the large technology firms, such as Apple and Google, starting to increasingly influence in the wealth management world.

Most wealth management firms today continue to embrace transformation as a single or small number of significant projects. They continue to invest in expanding their technology and operations stack, increasing complexity and avoiding rationalisation and simplification. Firms need to consider their overall operating model and aggressively investigate the cost, competitive advantage and efficiency of all parts of their business process. Over the coming months and years, outsourcing will become an increasingly attractive option for many areas of the business, allowing forward-looking firms to concentrate on winning business and improving client services.  

All too often the technology spending is in the wrong place – the back office – and not where competitive advantage can be secured – in more client-facing areas. This is where many of the disruptive technologies can become game changers.

Delivering the right digital services
It was therefore interesting to read in a recent survey reported in the Wall Street Journal that 57 per cent of HNW individuals aged over 40 and 80 per cent of those aged under 40 would consider leaving their wealth manager if they were not offered digital services. This is a fascinating statistic in itself, but my challenge to the industry is that wealth management clients are not just interested in any digital service – it has to be the right one.

Rather than, for example, just letting investors access their monthly report from their iPad, the technology needs to afford more freedom to investors to ask questions and interrogate the performance data. It’s not about enabling investors to self-service; it’s about improving the relationship between advisor and client, and enabling the client to have more ownership. Simply putting a new digital front-end on your client reporting engine isn’t the answer. Giving investors the salient information in a digital format isn’t the answer either.

Investor “pull”, not wealth manager “push”
Investors need to be able to ‘pull’ the data that they require, not just receive what the wealth manager ‘pushes’ their way. Many wealth managers don’t want their clients to ask questions and certainly do not encourage them to do so. They see digital services as a way of giving more automated information to the investor. In contrast, I believe that the right kind of digital services should facilitate more client engagement and more trust.

Media, phone and other technology companies have changed their entire business models to reflect the opportunities presented by digital services. Unfortunately I don’t think that UK wealth managers or existing technology suppliers are moving at the speed the market wants to move at. As a consequence, new suppliers will enter the market from both the technology and the wealth management perspectives.

If you introduce digital services to your clients, you need to consider changing your entire business model. It’s an opportunity, not a defensive mechanism designed to cut operational costs. Wealth management firms that are embarking on a mobility programme just because everyone else is doing it are missing the point.

A lack of innovation
Compounding the issue is a lack of innovation. Most of the true advances in IT today are coming from horizontal applications. For example in the area of CRM, firms are now embracing true cloud technology. If you look at other industries, we are seeing more innovative tools, an App-style approach and much more attention being paid to ground breaking systems delivery mechanisms than we are witnessing in wealth management. This is largely down to a lack of competition among the vendors.

Many vendors are filling their market communications with the buzzwords of the day, but these claims need to be challenged and fully understood. Sadly, terms such as “cloud” and “mobility” can be interpreted in many ways, allowing firms to make claims that at times stretch their credibility. Many firms are also using third party tools rather than truly integrated development to enhance their marketing messages in these areas.

Mobility isn’t just a new distribution channel to clients - it’s a new way of doing business. It should be seen as an integral part of a value-add business, not the latest technology fad. And in my view, the wealth management industry has been too slow in responding to this new approach.