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BEST OF 2013: The Digital Revolution In Wealth Management

Wendy Spires

20 December 2013

This publication is re-issuing some of the highlight articles of the past 12 months to coincide with the end of 2013 and the start of a new one.

This interview forms part of WealthBriefing’s latest research report, The New Normal: Codifying Superior Client Experience In Wealth Management, which was produced in association with Barclays Wealth and Investment Management and will launch on 15 May. To mark the launch, a webcast featuring senior executives from Barclays and others has been produced discussing headline findings, and access to both this and the report itself will be free as part of WealthBriefing member benefits.

The digital revolution of the past few years means that now even the more conservative institutions are making their first forays into social media and mobile. Here, Steffen Binder, managing director at MyPrivateBanking Research, discusses the sector’s progress and key drivers going forward.

As might be expected, client demand is perhaps the most important driver behind the industry’s digital revolution, and a lot of this is down to simple demographics. The next tranche of clients represents a “digital generation” who are reliant on electronic communications, imbued with social media culture and never without a mobile device. So while these clients may still value traditional meetings and calls, they also “very simply demand that they can communicate with their advisors through digital media,” said Binder.

The second major driver is tech-savvy advisors wanting to leverage mobile capabilities to get real-time access to portfolio data and present information to clients in a visually interesting way. Here Binder notes “a very strong movement” of frustrated advisors bringing in their own devices where their employer doesn’t provide these capabilities, with obvious regulatory and security implications. The potential to make client meetings more dynamic through live scenario modelling and the production of ad hoc reports does mean however that many firms are making investments in this area.  

The third and fourth major drivers behind the digital revolution are intertwined, explained Binder, the first being the need to communicate with stakeholder groups like analysts, journalists and job applicants which are “even keener” than clients to communicate and get information digitally. “If you want to make sure that your brand message and your corporate communications reach these stakeholder groups you have to make sure that you are using digital platforms,” Binder said, adding that fully leveraging new technologies is a particular consideration for the “bigger, more global players wanting to be perceived as a modern, technology-affiliated brand”.

Looking outside wealth management

The fifth driver is that historically the wealth management industry has been put to shame by other sectors targeting the HNW, like luxury watch or car manufacturers. “We see these industries as two or three steps ahead with regards to using digital channels such as social media,” said Binder. “There is a feeling, particularly among marketing people within wealth management companies, that they have to play a little bit of catch-up.” While the greater emotional resonance buying a car has over opening a new bank account explains why some sectors have invested more, wealth managers should be aware that HNW clients will certainly compare the digital experience they receive across their various providers, said Binder.

More importantly, he pointed out that the digital experience offered by retail banks is often far superior to that offered to HNW clients. Again, retail banks may have bigger technology budgets and more compelling reasons to invest, but it should be noted that the HNW are often early adopters of new technologies and may well feel entitled to cutting-edge provision. At present there is typically a one to three year lag between retail institutions offering a new tool and wealth managers catching up, said Binder - something which he sees as “a real shame because the wealth management sector should be the first one to offer those digital goodies”.

This lag is not however just about budgetary constraints or cultural reservations around providing personal service, said Binder, explaining that the “very different and differentiated needs” of the various client segments served by wealth managers makes it difficult to know exactly what HNW clients want. “They are in a trial and error phase and nobody has the ‘magic bullet’ yet in the wealth management space,” he said.

A digital “wish list” for wealth managers

Further complicating matters are the various functions digital channels have to fulfill for firms and clients. At the most basic level is the need for a transactional channel through which clients can check their accounts, trade and make payments, and while we might think of this as a given in today’s age, Binder notes the case of one very prominent Swiss private banking group which only implemented online trading a year or so ago. Wealth managers’ next priority should be digital communications channels, he said, noting that today email is “the most important communication channel in most markets”. The third digital channel firms should pay heed to, as referenced earlier, is the “face” they present to the outside world via social media platforms. Here, however, Binder warns that “it’s very important that you master those digital platforms because the world of media is quite unforgiving if you make mistakes on your Twitter newsfeed or on your official Facebook page”.

MyPrivateBanking identified a real lack of multi-lingual social media provision in its latest benchmarking report, but here it is easy to see the difficulty of simultaneously issuing content in multiple markets, in multiple languages while not falling afoul of any regulatory regimes. That said, at least some firms are making a concerted effort to offer social media output in their “home” language and a lingua franca such as English. Indeed, Binder foresees things soon becoming “state-of-the-art” with banks better able to cope with the practicalities of operating multi-lingual social media platforms in tandem. “Wealth managers have to reach out to people through these digital platforms and be able to make the step to balance their global and local activities,” he said.

The use of social media platforms as a marketing tool may have rapidly gained traction, but many contend that using them for client-advisor communications is the next logical step. Understandably perhaps, the industry has been somewhat reluctant to implement this due to regulatory and security concerns, but arguably client demand could see these fears overcome in due course.

In fact, Binder believes that developing instant messaging capabilities should be high on wealth managers’ digital wish lists as the immediacy of instant messaging will make all manner of platforms – from Whatsapp to Skype and Twitter – increasingly important. “Instant messaging is a communication channel with significant growth potential as it’s a very convenient way for people to have a conversation with their advisor while they have a meeting going on, or are sitting in a café reading the newspaper,” Binder said. “I would advise banks to think about including instant messaging capabilities in their platforms. Especially when we take into account the fast proliferation of smartphones and tablets, it can be easily seen that instant messaging is a critical communication channel.”

Here again security concerns may mean that some firms will prefer to develop proprietary tools, perhaps within their own apps, said Binder. This is also arguably preferable from a branding perspective, allowing  firms to preserve a sense of exclusivity as some have done in the creation of private social media networks.

Regional trends

Binder noted some interesting regional trends when it comes to digital experience. Predictably, since it is home to many of the world’s biggest technology and social media organisations, the US is slightly ahead of the game in many areas, he said. (Here we could note that Morgan Stanley permitted its US advisor force to use Twitter and LinkedIn professionally last year.) The Asia-Pacific market is also at the forefront of all things digital, Binder added, noting that Hong Kong and Singapore are particularly strong on the mobile side of things.

While Europe is flanked by more progressive technology markets, Binder points out that the region is actually “very heterogeneous”. “Overall, Europe is not in such a bad position but what we see is that there are markets which are very strong in Europe when it comes to digital platforms and also markets which are quite weak, and even ones which are almost not identifiable on the digital map,” he said. Among the stronger ones are the UK, Germany and France, while southern countries such as Spain, Italy and Greece are generally weak. Surprisingly, Binder noted that the Scandinavian banks are also weaker on the digital front than one might expect given these countries’ generally strong digital footprint.

But it’s not just in the development of “digital goodies” that the US and Asia-Pacific are ahead, since institutions from these markets are also far better at quickly rolling out digital tools across their various markets. “This is something we’re lacking in Europe,” said Binder, explaining that it is common for a major banking group to “do something very well in their home market and then not roll it out to the other markets they are present in”. This tendency, is “a shame”, he said, because once all the hard development work has been done “it’s only a small step to roll it out in a dozen other markets and market it there”. This is an area where Asia has a real strength over Europe, said Binder, citing several cases where banks have rolled out apps across multiple markets in multiple languages in quick succession.

Binder highlighted Singapore’s DBS as a real leader in the mobile space, it having rolled out a whole suite of apps which is “just breathtaking”. In addition to an “excellent” core banking app, DBS offers apps for dining out, travel and shopping, along with utility tools like a QR scanner. Looking more closely at the bank’s shopping app, it has a “camera view” function that allows users to scan their surroundings so that the nearest privileges open to them as a DBS client “pop up” via augmented reality. The potential to step up this technology to reward the loyalty of HNW clients is clear.  

Smartphone capabilities are a clear priority, but as they develop their mobile strategies firms need to bear in mind that tablet devices are really where things are heading, Binder warned. “Tablet computers are becoming more and more important in the finance sector – the smartphone was the door-opener but the tablet is now really catching up quickly,” he said. Practicalities like their larger format making it easier to view complex information aside, tablets are also better suited to the kind of interactive content that the sophisticated HNW segment demands. Here again, wealth managers might look to emulate DBS, said Binder, since its tablet apps feature “very rich” content like analyst and CIO research videos. “These apps are really targeted at the HNW segment and we see this as a big step. I haven’t seen such well-developed tablet applications for the wealth management segment in Europe yet,” he concluded.