No digital? No joy!

Why wealth managers without an integrated digital offering are out of play

My last blog is already been quite a few weeks ago. It has been very busy on all fronts, but not with blogging on SocialFS. A recent visit to Hong Kong as well as several conversations with many interesting people in the wealth management industry from Europe, North America and Australia formed some interesting views around the use of digital tools within the wealth management industry.

Soon from now we might end up saying that wealth managers that are not meeting HNWI demands regarding digital are out of play. I had the honor to present the World Wealth Report in Hong Kong in June. This report shows that an average of 65% of the HNWI population across all age groups and wealth bands are thinking of leaving their wealth management firm when there is a lack of digital (enabled) services. For the younger HNWI population this is even 80%. This research has been conducted among over 4500 HNWI globally.

The report also shows that there is an increase in the preference for digital contact versus a decline on direct contact. (Please see the figure below).

Direct vs Digital

During my stay in Hong Kong I discussed these developments in a broader perspective and what surprised me is the difference between acceptance of the trend and the actual way this knowledge is applied. The key challenge I note is the lack of priority the digital trend gets over for example regulatory programs. I understand the importance of meeting regulatory demands, but the importance of digitisation cannot be underestimated. The need to innovate should not only be driven by regulations. Is the customer’s voice not enough? If markets are performing well and portfolios are performing well the direct need to innovate is made inferior in business decision making, while when markets slow down, firms are focusing in limiting the costs. Does this say there is never a reason to innovate? Probably it is the challenge of an underlying business case. Revenue increases are sometimes difficult to quantify, but on the other hand the efficiencies are definitely there.   

What focus?

I don’t say there is no attention for digital services, channels etc, because there are enough examples of firms looking to use apps etcetera. The most recently published Mobile  Banking Apps report by Myprivatebanking.com provided some interesting outcomes on the current position of banks towards the use of Mobile Apps.

“Banking apps frequently offer only basic functions, but missing out on more advanced features. The investment account overview is limited to 83% of banks and securities’ trading is still only available for about half of the banks (55%)”, the report says.

Besides this there are just a limited number of firms with a completely integrated digital strategy or digital transformative approach to get the maximum potential out of it. The driver should be the added value it provides to customers, but there are great benefits for the wealth management firm as well. There is a clear opportunity for wealth managers to improve service levels, customer experience and efficiencies in delivering of their services to HNWI’s due to the increased number of touch points. Touch points for which the customer can decide when they take place. New touch points provide great potential.

As I discussed in an interview with FamilyWealthReport around Big Data opportunities in wealth management, the information about a client’s online and mobile activities, for example, sheds light on their behavior. “Being such a client-driven business, the goal for “digitally-transformed” wealth managers is to have a complete picture of all types of interaction they have with clients and a clear sense of how effective these touch points are – in terms of meeting client expectations and attaining financial and strategic goals”. 

If you want to offer the right type of service, products in a way a customer’s wants, it is essential to understand your clients’ behavior. Analyzing this would very beneficial to advisors (knowing your customers), marketing departments (for tailoring campaigns), product development (tailored to what is needed by the customers), risk management (for HNWI individually, driving KYC and for the firm in general) end so on.

Examples of how good might look like

It is great to see that there are examples of organizations who are taking the steps to meet the increasing need for digital channels and remote services. BNP Paribas Private Banking recently started offering a concept of ‘Your own remote private banker’. This is an interesting concept aligning to clients that have become increasingly tech savvy in the past years. This concept shows several opportunities for organisation to become much more efficient (for example by using the remote advisor concept, saving travel time and be more flexible when you would like to speak with an advisor).

The virtual concept is not only relevant for individuals. This concept is also brought into practice for family offices. Virtual Family Offices like Lakeside are using the lower cost operating model to services families against lower cost, while still meeting the needs of the families they are servicing and the ability to provide specialized advise.

The opportunities for digital are enormous and diverse. A few to add:

  • As a firm show your ability to be a forward thinker;
  • Align to the needs of your clients that increasingly demand digital and mobile interactions;
  • Leverage the opportunity of big data analytics;
  • Cost efficiency due to more effective use of advisor time (e.g. less travel by remote advisory services using video conferencing);
  • Lower cost of services, making services more accessible for a broader group of customers (like the mass affluent).

Overall it is fair to say that as a firm you are missing out on a large (future) HNWI target group that requires you to offer an integrated digital customer experience. Repeating myself by saying digital is not replacing the advisors I strongly believe in the personalized experiences that can be offered outside the meeting room or the golf course.

If you are still not convinced in the value of your customers? Read this short Harvard Business Review blog around ‘The value of customer experience, quantified’!

advisors

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