Robo-advice  

No wealth manager left behind?

No wealth manager left behind?

Recent years have seen several high-profile financial institutions sell, scale back, or even abandon their wealth management operations against a backdrop of consolidation among the sector’s traditional boutique players. 

Many businesses are struggling against a wave of digitisation in the wealth management arena – once called ‘one of the least tech-literate financial services sectors’ by PWC – driven by the rise of robo-advice services.

Although it is now more vital than ever for traditional wealth managers to embrace technology, historically many have, incorrectly in our view, not prioritised this essential factor for both customer engagement as well as operational efficiency.

Key Points

  • Many businesses are struggling with digitisation.
  • Family members of HNW individuals often ditch their advisers.
  • Wealth managers can outsource to digital providers.

This reticence to adopt technology has been compounded somewhat by the fact many traditional wealth managers have viewed the failure of many robo-advice models recently as a reason not to enhance their tech proposition. 

This is a big mistake in our view as wealth tech should be seen as an enabler for their operations and client relationships team, significantly improving efficiency, as well as providing a much more engaging experience for their clients. 

Need for digitisation

For many years, wealth managers struggled to embrace technology in the same way as other areas of the capital markets industry.

The arrival of the ‘internet of things’, including the prevalence of mobile and internet banking, means the new generation of wealth management clients expect 24/7 access to real-time reporting, account management and portfolio overviews accessible in any location.

Despite this, due to increasing regulatory costs, most wealth firms now have a suboptimal book of smaller client portfolios. Digitisation provides a clear solution to this need for an alternative and more cost-effective way of managing client money.

Many robo-advice services bypass the issue of managing smaller client portfolios and digitisation partially by investing client funds into one of a limited range of passive-driven portfolios and providing a basic digital service.

What they do not do is offer the end-to-end service provided by traditional wealth managers.

This includes everything from hand-picked portfolios managed proactively by a team of investment experts, to detailed, customised performance reports and efficient and secure client onboarding services.

Overwhelming task

The need to bring the full wealth management experience into the modern age is apparent yet the task can seem overwhelming. However, off-the-shelf services can allow wealth managers to digitise at their own pace.

For example, many of our larger customers wish to maintain control of their clients’ investments and custody, but want to outsource some specific elements of the pure wealth technology side of their operation.

A typical example is the process of onboarding a client, something that is hugely time-consuming, expensive and generally frustrating for both the wealth manager and, importantly, the end client.

We believe that the cost of onboarding or repapering a £200,000 client account would cost around £2,000.

However, by using a quality technology provider as a partner, this cost can easily be halved by automating much of the information collection and validation and allowing the advisers to focus on the matters that really add value to the client.