New Digital Banking
Digitalization rates in wealth management have accelerated markedly as an consequence of the pandemic. Image Credit: Supplied

Digitalization rates in wealth management have accelerated markedly as an consequence of the pandemic. This clearly requires wealth managers to get acclimatized to new models of operating, servicing... and sourcing.

Digitalization in wealth management was gradual until it became all too sudden. Pre-crisis, most wealth managers and private banks worked on three- or even five-year digitalization plans.

This has changed forever with the crisis. It has become impossible to meet customers physically from one day to the next, which demands a rapid change in the service models. Markets remain extremely volatile, and customers need counseling and reassurance.

An entire workforce had started working remotely. This then marks the beginning of a mandatory rethink in the operating model for wealth management (and a lot more besides). Suddenly, digitalization is no longer a roadmap for five years.

Fast turnarounds are required at a time when companies are less well equipped for it. Budgets for digital investments will not be free flowing, at least not without reprioritization. However, wealth managers will need to find a way to invest in digital roadmaps and accelerate the process.

You cannot postpone digital projects until after the crisis. In fact, technology and wealth management are made for each other. Wealth managers need to look through the cycle and invest to be ready for what is on the other side, which will certainly not be a return to normal.

The following quote sums up this rather counterintuitive reality: “This ecosystem view is why, when there is a shock like a pandemic, businesses that look to cut back and optimize will fail as they need to invest to traverse to a new local maximum in a changed fitness landscape.”

Fit for the times

While we may not know the recovery shape or the duration of the crisis, we do know that the future of wealth management will certainly be more digital. It must develop an ability to produce at near-zero marginal cost and the capacity to gather and process a significantly larger amount of data about customers to personalize services - and do so at scale.

The delivery channels must change, but not in a crude switch from physical to digital self-service. Instead, we see a blend of self-service and augmented advisor interaction, where technology makes the experience richer and more seamless.

And there will be embedded services, where wealth management is offered up through other horizontal channels.

A mix of own and sourced

With more data and content available, the service becomes more customized. The model of sourcing will change too. To retain customers and give them value proposition – at scale – will require wealth managers to combine own-label products and services with third-party ones. Additional technology will enable financial providers to source and re-label solutions, as has already happened in payments.

Wealth managers’ value proposition will shift, which will require a reboot of the business model. Discretionary safeguarding of assets will no longer be enough. Instead, it will comprise assets and data both. Convenience will be a focus too.

What does post-pandemic digital wealth management look like?

* Better advice, more transparency;

* New services aimed at “decumulation” of assets: and

* Risk and wealth preservation.

Post-pandemic wealth management should be distinguished by the ability of companies to add value to consumers by analyzing and drawing knowledge from various datasets to provide services that are more personalized, beneficial, and risk-optimized. And which delivers stable and even high returns against their financial goals. The best part is it’s all happening at once.

If we had to point one meta trend in the wealth management space, it is certainly the move from assets under management to “assets under intelligence”.

- Chahat Mishra is Sales Analyst at Valuefy Solutions, while Chetan Chaudhari is Market Development Manager at the company.