This is a very reactive way to responding to regulatory changes and technology can be more than just a compliance tool.
The cost of doing business is consistently increasing, driven by a wave of issues ranging from ongoing regulation, to changing demographics and consumer demands, and downwards pressure on fees.
Those who embrace technology as part of a company-wide strategy rather than a silver bullet to solve these pressures, will deliver a more professional service for clients.
Technology has professionalised the industry significantly over the past decade and has been an important enabler for companies trying to stay relevant to and for their clients.
Keeping costs low is crucial to the survival of these businesses in an industry consumed by an increasing scrutiny of fees.
Regulation is not the only pressure facing advisers and wealth managers, with changing demographics, rising competition, and the user experience being increasingly driven by digital solutions.In this environment, technology is either a burden or a key advantage to maintain cost-efficient business.
The upcoming GDPR directive has brought to the fore some of the downfalls of how legacy systems in advisory and wealth management businesses are handling customer data.
Historically, it was common to store customer data across multiple databases, which is both cost and time ineffective for the adviser and their client.
Regulation is changing the rules. Using the example of data, businesses can either leave it to become a huge burden, or act now and turn it into their USP.
At current levels, it is more likely to be a burden for businesses who did not have a strategy in place soon enough.
The ability to retain data in a single location – particularly for businesses growing organically – can help to advance engagement with clients or prospective clients.
Multiple documents and spreadsheets for each client are being replaced by systems using CRM tools, as businesses are increasingly recognising that they cannot afford not having an overview of customer data in one place.
Another example would be the new required audit trails that forms need to maintain.
When looking at new front-end solutions, wealth managers and advisers should not only look at user features but also question if these capabilities will help them be compliant.
As an example, front-end solutions allowing audit trails such as live written or video chats can enable better communication with clients, helping to deliver an improved customer experience while also facilitating regulatory compliance.
One barrier is that technology can be costly to implement, particularly for smaller businesses without the scale of their larger competitors.
However, there are some historical systems which require a gradual evolution to better meet the needs of clients, which should be the starting point for businesses wanting to stay relevant.
Redefining the customer experience
Regulation is not the only pressure facing advisers and wealth managers, with changing demographics, rising competition, and the user experience being increasingly driven by digital solutions.
Businesses founded on face-to-face client engagement are now having to adapt to a mobile-first world, while open banking and financial dashboards are democratising the experience for the end consumer.
The wave of start-ups, coupled with the advances of robo-advisers means that more established businesses need to do more to keep up with the rising tide of technological solutions that consumers desire.
Pressures on the industry will continue, but a great opportunity lies ahead for those able to perfect the formula.
With an ageing UK population and the unlocking of assets through legislation such as pension freedoms, the industry has a tailwind of money coming towards it.
Keeping up with technology is imperative for businesses which want a slice of the pie.
Maarten Heukshorst is chief relationship officer at BNY Mellon’s Pershing
