Is now the time to change attitudes to tech?

Already in 2017 we have seen revenue compression from pricing pressures, which is keeping costs down and simultaneously delivering services expected by increasingly digitally savvy, demanding clients in a highly regulated world.

Cap Gemini’s 2016 World Wealth Report found that demand from high net worth individuals globally for automated advisory services has grown dramatically from 48.6 per cent in 2015 to 66.9 per cent in 2016 and this trend is expected to continue and accelerate.

In a competitive environment in which regulatory pressures are unlikely to ease any time soon, wealth managers are dealing with a client base that expects them to be flexible, responsive, offer personalised and tailored services and deliver ever greater ‘value’.

Clients who are comfortable with using digital technology in different aspects of their own lives may view a company as failing to move with the times if it adheres rigidly to ‘traditional’ ways of doing things.

Data remains a challenge for many with integration to multiple systems adding to complexity, risk and cost.

The reputational risk is a live one and will impact revenues – Cap Gemini’s findings also suggested that firms offering sub-optimal digital experiences could put as much as 56 per cent of net income at risk, due to client attrition. Whilst the scale is debatable, the direction feels intuitively valid.

People are increasingly used to receiving real-time information and alerts, being able to contact service providers 24/7 and tailor the way they access and engage based around their own personal preferences.

In 2017 such functions are more than just added features; they are differentiators and, increasingly, service expectations. Additionally, Mifid II drives a range of responses for which digital capability would be a key delivery tool.

The digitalisation of wealth management processes creates a raft of opportunities for firms. Those unwilling or too slow to take advantage are at risk of being left behind. That’s not to say it’s all about digital or about the next ‘big thing’. It’s about offering unified services through the most appropriate channel.

I expect investor clients will have an increasingly unfavourable view of those firms unable or unwilling to offer a flexible, joined-up ‘channel choice’ that best meets their specific requirements; face-to-face for some things, digital for others.

The customer-facing solutions are just one component. The cost of servicing clients may edge up as they become increasingly demanding, yet firms are operating in a cost-conscious environment.

Improvements to operational middle and back office systems can create efficiency gains and meet regulatory and market demands while protecting revenues.

Firms operating several different systems and incurring multiple running costs are missing out on the greatest efficiency and revenue gains.

Using a raft of incompatible systems that don’t easily connect increases the likelihood of duplication, mistakes and time-consuming processes that undermine the quality of service enjoyed by clients. Data remains a challenge for many with integration to multiple systems adding to complexity, risk and cost.

In other words, firms that continue to run older, disparate systems risk being distracted from new business opportunities. They may also be incurring greater costs and losing clients and assets.

Advisers and wealth managers now have access to integrated systems that allow them to segment, engage with clients digitally, advise, trade, comply, plan and report. All from one integrated technology.

It isn’t simply a case of buying into whatever technology is available, however. The real gains are made when investment in systems is done strategically, with a recognition of where the existing gaps or shortcomings may be, what could fill them and how.

Understanding what’s driving the adoption of technology, how to get maximum value from it and identifying the potential risks is vital.

If advisers and wealth managers have so far been reluctant to embrace the potential of unified technology, the multiple pressure evident in revenue, cost and proposition reinforce the view that now is the time to change if they are to thrive.

Andrew Foster is executive general manager, private wealth, at Iress