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Get Right Balance Between Man And Machine

Darren Berkowicz

SS&C Technologies

31 March 2021

The public health response to the global pandemic tested the resilience of wealth managers and family offices on a number of critical measures, but perhaps none so profoundly as their ability to sustain client communication and confidence. Without the benefit of in-person meetings or opportunities to mix socially, firms had to be especially creative in finding ways to maintain an appropriate level of client contact – particularly in the early days of market uncertainty, when wealth managers had to calm investors’ nerves and persuade them to stay on course. Firms also faced a similar challenge internally, as they sought to maintain a sense of culture and collaboration among staff forced to work remotely.

The situation favored firms that had invested in digital communications tools, such as interactive client portals or mobile access apps. Even before the pandemic, the role of technology in creating a differentiated client experience, while at the same time enabling firms to service clients at scale more efficiently, was a lively topic of discussion in the industry. The pandemic simply underscored the importance of having a robust digital presence and accelerated the trend toward online communications from both the client and wealth manager perspective. Individuals and families became even more reliant on – and comfortable with – interactive technology in nearly every realm of their personal lives. Videoconferencing, a staple of the business world for over two decades, suddenly became a fixture in consumer households. 

Now, many experts are telling us that changes wrought by the pandemic – particularly those that increase convenience for the consumer and efficiency for businesses – are likely to be here to stay, even after the vaccines have done their job. As the industry prepares for a post-pandemic world, it is a fair question to ask: has the pendulum swung too far? Does digitization pose the risk of diluting the personal equity wealth managers have built with their clients over the years, or in some cases over generations? How do firms strike the right balance between “white glove” service and digital self-service appropriate to each client’s personal preferences?

Technology’s evolving role  
Historically, this is a relationship business, especially for multi- and single-family offices (MFOs/SFOs) and wealth managers serving a UHNW clientele. Personal trust with clients is a firm’s brand promise. Equally important is building rapport, the ability to show clients that you understand and empathize with their aspirations, life choices, and views about wealth. Until recently, technology largely stayed in the background, enabling firms to serve clients efficiently and deliver error-free reporting, but for the most part invisible to clients. 

Today, however, technology has become integral to the client relationship. A strong digital backbone with multi-channel options for interaction is virtually essential for wealth managers and MFOs who wish to stay relevant in their clients’ lives. Some traditional investors may welcome the quarterly in-person portfolio presentation (or video chat), while others will want to check their performance daily online. Some clients may be perfectly comfortable with a digital onboarding experience, but they don’t want to think that an algorithm is doing their asset allocations. Firms must be prepared to accommodate a wide range of highly individual interaction preferences.

Bridging the generational divide 
Family offices have the added challenge of preserving and strengthening relationships across multi-generational families. High-end wealth managers, too, need to develop a rapport with their clients’ heirs if they hope to retain their assets when they inherit their parents’ wealth. These days, younger family members are likely to be “digital natives” who have grown up with always-on smartphones and tablets in their hands. They may even prefer digital over human interaction in their financial affairs, and be skeptical of seasoned professionals' advice when they can get a range of “expert opinions” instantly online. 

Technology is key to bridging this generational divide within the context of a holistic family or household relationship. But it must be a complement rather than a substitute for cultivating trust and a rapport with all family members. A firm that can show clients that it has their best interests at heart, while simultaneously delivering a modern digital access experience, will have a better chance of sustaining relationships as wealth is transferred from one generation to the next.

Technology as a service differentiator
Paradoxically, firms that leverage a high level of automation and integration in their operations are in the best position to deliver the personalized service that sets them apart. Freed from laborious administrative tasks, managers can focus more proactively on clients and their life goals. Instead of processing data, they can spend more time reviewing and analyzing data to make better-informed recommendations and decisions on their clients’ behalf. They have the information they need at their fingertips to drive meaningful and productive conversations with clients. Success goes to firms that deploy technology effectively in the service of users, not the other way around – empowering people with greater flexibility to meet their clients’ needs rather than locking them into rigid processes.

So how can firms quickly achieve the technological agility to adapt to changing client expectations and support a superior service model? The question has many wealth managers and MFOs rethinking their technology strategies from the ground up. Building a viable technology infrastructure for the long term can be likened to building a house – it requires a strong foundation and thoughtful planning. Missteps at the planning stage may constrain your ability to add enhancements in the future.

Rebuilds or outsource? 
Given that technology is constantly advancing and evolving, many firms have turned to the outsourcing option to reduce the risk of falling behind. Outsourcing doesn’t have to be the “one-size-fits-all” proposition that it used to be. Under today’s co-sourcing arrangements, wealth managers and family offices have the flexibility to outsource some or all of their core investment management technology, as well as operational and compliance workflows, while retaining certain activities in-house.

Reducing operational overhead is certainly a key factor in the outsourcing decision, but no longer the most compelling reason to outsource. Firms today choose outsourcing to drive greater efficiency, achieve scalability and reduce operational risk. Outsourcing typically allows firms to implement new solutions more quickly than an onsite installation, and to stay current on technology with regular upgrades included in their service. And, as many firms have discovered under work-from-home orders, offsite technology hosting makes business continuity planning much easier.  

Outsourcing may, in fact, enable firms to achieve the optimal balance between technology and talent. It allows firms to offer clients a modern digital experience while making the best use of their human capital – freeing people from operational drudgery to focus on building lasting connections with clients.

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This is a chapter from the 2021 edition of Technology Traps Wealth Managers Must Avoid. Click here to download your free copy.