Survive, sustain, grow.
That, in short, describes the wealth management industry since the global financial crisis to today’s state of transformational change.
Tighter regulations, increasing costs, fast-paced customer demands, market shifts, and disruptive technologies are creating a new playing field for wealth managers as more wealth flows into the Middle East and North Africa region (Mena).
The role of technology is increasingly shifting in the region. Traditionally invested in back-office functions to drive cost-cutting and improved efficiency, the focus is moving now towards the front-office.
The emergence of digital technologies for delivering services is forcing wealth managers in Mena to invest in their front-office digital capabilities or run the risk of falling behind and becoming obsolete.
The main technologies leading the charge are mobile. The “anywhere anytime” ability to complete transactions is developing into the preferred channel in the context of device availability.
Social media, an ever-present medium, gives one the ability to interact with peers on products, portfolios and performance. Wealth managers in Mena are realising the importance of advanced analytics in all aspects of their business.
Finally, cloud-based computing provides wealth mangers the ability to reduce costs. These digital technologies — combined — will shape the future value proposition in the region.
Digital strategy is seen as the highest priority for many wealth managers in the region. Many, however, admit to not having defined that strategy, or fully understand the core requirements, but most agree it is now a key enabler.
Outdated core banking systems built on legacy technologies are severely threatening the ability of wealth managers to launch new products and services, acquire other players and streamline operations. A wave of transformational spend is hitting the industry, aimed at modernising outdated technology and core systems.
There is no denying the growth in mobile technology. The rate of digital disruption will be great and the change sudden, as has been witnessed in other industries.
Empowered clients will leave existing providers if the experience is not what they perceive. Especially when something as important as managing wealth is compared to the relative ease of other parts of digital life, clients are looking for the simplicity of the digital transactions they treat as normal day in, day out.
This much is certain; wealth managers are left with no choice but to strategically invest in their IT. These IT investments are needed to modernise core banking platforms built around legacy technologies and to improve the client experience through digital capabilities.
Today, almost all banks in Mena have online platforms. Compare this to 10 years ago — online banking did not exist or was only available to corporations.
The multiplication of channels for doing business will require larger outlays on technology than in the past. The smart application of technology is turning into a source of competitive advantage, providing ample opportunity to level the playing field and to leapfrog the competition, for those that are prepared.
IT will take on a much more leading role in driving business change towards digitisation.
So as most wealth managers realise that digital transformation is a necessity and a digital strategy is key to the success of the institution, we await the move to fully integrated change.
In its wake, digital will make the traditional business model obsolete. The wealth managers that succeed will fully transform into their business into a digital business and will gain clients and market share.
The message is loud and clear — update your systems or get left behind.
— The writer is Executive Director, MENA Wealth & Asset Management Leader, EY.
