The global wealth management industry has experienced turbulence which no one could have predicted last year.
The pandemic experiences of the sector are different depending on whether you work in the US, Europe or Asia. The Aite report (link below), sponsored by Temenos: COVID-19: A Global Perspective on the Impact on Wealth Management, makes for fascinating reading. It certainly demonstrates that the lessons we learn from this catastrophe must be ones we carry forward, act on and remember in the immediate period to come. Taking our collective eyeballs off of our shared pandemic alert systems is now not an option unless we want to see another, but even worse resurgence of nature’s disruptive abilities. But there are steps we can take to protect ourselves, and they are digital ones.
The question which came to me immediately was – in terms of how the sector has fared globally– why have some geographies been more affected than others? The report says: “Early indications point to successful results experienced by well-capitalized incumbents—mainly U.S.-domiciled—that have invested heavily and regularly over the last 20 years in modernizing their firms’ front-to-back technology capabilities and that have embraced digital client engagement.”
It goes on to say:
“On the other hand, most firms in Europe and the Asia-Pacific, particularly those that began their digital transformation only sporadically in recent years, or too late, did not fare so well.”
Now the obvious observation is to look at the US companies and conclude that they had buckets of money and could put some aside for a rainy analogue-less day. But the companies which were well on their ways to digitalization were the ones who had looked far enough ahead and came to the conclusion that their customers were digitally savvy enough to follow them.
It long ago ceased to be a matter of digital one-upmanship. Now to fall behind the competition at the wrong time on just one aspect of being responsive can leave you struggling by the side of the road as your competitors coast past you.
The white paper points out that none of the surveyed firms around the globe experienced a drop in client demand for digital during the pandemic. This major shift in client demand may very well redefine the wealth management engagement models of many more sustainably—probably even permanently. The digital future arrived rather earlier than many companies thought it would – and now there is no going back.
As the white paper says:
“The clear lesson is that digital is no longer an ancillary side strategy or business line within wealth management. It is firmwide, is strategic, and is an inseparable enabler of key performance indicators such as client communication volume, trading volume, investment performance, net flows, and outbound marketing activities.”
The report makes it clear that a clear winning proposition in these testing times is discretionary portfolio management. Discretionary investment management is a form of investment management in which buy and sell decisions are made by a portfolio manager or investment counselor for the client’s account. The term ‘discretionary’ refers to the fact that investment decisions are made at the portfolio manager’s discretion.
After digital engagement, client reporting is the second most needed business application update.
Adopting more digital technology is as necessary to your business’s survival as lockdown in a pandemic, even, as in the wealth sector, where the relationship with an advisor and in-person meetings remains critical, there are still digital aspects which will benefit wealth clients.