Technological innovation has become essential to ensure that the wealth management industry serves the future needs and demands of the customer, market, and regulatory landscape, and it will continue to dominate in 2016, writes Thibaut Jacquet-Lagreze, head of marketing and sales HQ at Avaloq
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As we head into 2016 the wealth management and private banking industry is facing a dramatic change. More demanding clients, digital transformation, regulatory changes, internationalisation and growing competition are increasing the overall costs of operations and hitting profit margins. As a result of such challenges, traditional business models are being forced to transform.
This presents three distinct challenges for wealth managers. The first being costs versus profitability and how to strike the right balance. Wealth managers face increasing pressure to demonstrate they are providing value for money to their clients. Their service offering has to stay relevant in a market where fintechs such as robo-advisors are now aggressively targeting affluent and tech-savvy investors with new investment management services at very low-price. Wealth managers therefore need to improve their efficiency and level of service in order to increase profitability and competitiveness.
The second challenge sees wealth managers continue to navigate their way through the increasing costs and complexity of financial regulations. Global and local regulatory changes make growing internationally increasingly challenging. Utilising technology to comply with new and ever changing regulations in a very cost-effective way has therefore become even more critical.
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By GlobalDataThe third challenge is digital transformation and the gauntlet it lays down for wealth managers. The cornerstone of this is to meet client expectations in digital channels. Clients want transparency on their investments’ risk and performance and expect informative, continuous interactions from wealth managers no matter what channel is being used. Adapting the digital channels to an appropriate level of service is also imperative and for wealth managers this means tailoring the right level of information and self-service depending on the type of services offered – managed accounts, advisory or execution-only.
Although in the coming years, while wealth managers will move towards greater communication through digital channels, this will not replace face to face meetings or phone calls as human interaction will remain a fundamental part of the relationship between wealth managers and their high net worth clients.
Looking even further ahead, as technology continues to develop wealth managers will get the opportunity to further increase their client experience with the use of artificial intelligence. There could be interesting applications in the fields of risk and performance optimisation, behavioural finance or wealth planning. However, this is a topic that is still currently being widely debated and undoubtedly will continue throughout the coming years. In the meantime, wealth managers have already started to leverage market data available. For example, they have started implementing innovative portfolio construction engines to optimise the risk/return of client investments. So, as big data becomes increasingly relevant and small data remains equally important to support client relationships, it has never been more vital for wealth managers to take advantage of smart technology to add further value to their proposition.
One thing is clear – the wealth management industry should continue to change at a rapid pace. As a result, technological innovation has become even more essential to ensure the industry continues to serve the future needs and demands of the customer, market and regulatory landscape. Experts like Avaloq help to take the risk out of change by providing innovative solutions that support the financial services industry through transformation. Without it wealth managers will ultimately be unable to capitalise on the growth of high net worth individuals’ wealth or compete amidst new players and incumbents that were quicker to transform.
