Last week we were catching up with a client working for one of the regions most prominent wealth management firms, and we discussed how digital disruption could be a huge game-changer for the industry over the next decade.
The strategic use of technology could be the future of wealth management.
We are seeing an immense shift of wealth from baby boomers to the younger millennials, the effect of which is a transformation of the industry regarding increased efficiency and the inherent need for adaption by established firms. Now more than ever, the retention of loyal customers must balance with clients demanding greater choice.
A recent survey by Forbes has shown that by 2020 over half of all investable assets in the US will be controlled by those aged 16-50. Furthermore, a huge $1 trillion each year passes down to younger generations. In other words, investors under 50 are becoming more valuable to wealth and relationship managers.
So, what does this really mean for the future of wealth management?
The financial services industry is fast becoming one of the most digitised in today’s world. Over 60% of all retail banking transactions occurs online. The lesson to be taken from all this is channel diversification.
Traditionally, high net worth clients have been seen as desiring personal contact regarding their asset portfolio, but this may no longer be the case. In Europe, forty-seven per cent of ultra-high net worth clients are on Facebook. Additionally, forty per cent of high net worth clients under 50 believe that social media is an important platform with which to interact with their bank. So it seems important and logical for wealth managers to utilise the power of online channels and social networks. In fact, a 2012 Forrester study showed that client-advisor relations via digital channels actually correlated to higher fees earned.
The lesson here is not that wealth management must wholeheartedly embrace digital channels and ignore traditional methods of communication. But it does appear that stronger client relationships, enhanced risk management and lower operating costs are achievable via the capitalisation of digital channels.
Digital technology can help clients not only connect to their peers but also multiple sources of advice and multiple accounts. What this means for wealth managers is in fact distinctly higher levels of investment activity. The key ingredients for stronger customer analytics, and crucially, future growth could lie in embracing the digital world.
By embracing younger high net worth clients, and their desire for varied methods of communication, wealth managers could identify client needs earlier via online interactions. Furthermore, digital channels are an excellent way to connect early on with high net worth clients’ children by offering direct access to specialists.
Digital technologies have the propensity to answer unmet needs and ultimately provide clients with a superior experience, whilst simultaneously capitalising on evolving market prospects.
To learn how digital disruption in wealth management may affect your career, please reach out to our recruitment team for a coffee.
Michael Cunningham is a Partner at Anton Murray Consulting, working from the Sydney Office.
Anton Murray Consulting is specialist recruitment consulting firm focused on providing high calibre banking professionals to clients primarily within the Investment Banking, Funds Management and Wealth Management sectors. Headquartered in Sydney, Australia we work on a diverse range of assignments across the Asia-Pacific region across our four primary locations of Sydney, Singapore, Hong Kong and Melbourne.