How the COVID-19 Pandemic Hit the Wealth Management Sector

In this Blog, we speak about the most recent findings of the report by AITE Group LLC, who have reviewed the challenges and opportunities of the Wealth Management Sector.

Alexandre Duret
Alexandre Duret – Product Director, Wealth

The recent study by Aite, titled: ‘COVID-19: A Global Perspective on the Impact on Wealth Management’, sponsored by Temenos, has some interesting observations. One might argue that it is still early yet to be coming to any conclusions or to be analysing the effects of COVID-19 on any industry. Still, the report digs out some actionable findings.

The nature of the crisis has impacted wealth management on multiple levels. The fact that it is wealth management means that wealth clients are likely victims of the virus. Clients must also be worried about their financial lives due to the level of unpredictability in global financial markets due to the lockdown measures.

The virus’s unprecedented nature makes it difficult to predict the length or precise course of the crisis. The ‘second wave’ that has engulfed some countries shows us that this pandemic is far from over. As developing an effective vaccine against the virus is still months away at best, it is increasingly becoming clear that the world will be in crisis mode for an extended period.

One of the more far-reaching effects of the pandemic was the sudden switch from working in an office to home-working. The report explains why the Japanese had issues with home-working, but Europe companies and the UK took to home working very quickly. Those organisations which insisted on presenteeism, for historical, cultural or other reasons, also lucked out. In some private banks, security protocols designed to protect client data were simply not designed for home working. And local regulations on data residency certainly compounded the issue for non-resident staff, not allowed to work from their country.

Across the Asia-Pacific and European regions, a broad cross-section of multinational firms, midsize regional firms, small-scale boutiques, and Middle Eastern wealth managers that service their clients across European booking platforms landed in the negative category. In North America, those that responded negatively ranged from the US subsidiary of a multinational corporation to a regional broker-dealer firm.

The report concludes that home working has been seen as very positive for most organisations. Those organisations which embraced home working before the pandemic were in a much better position to avoid disruption. That is I think because they had invested not only in their tech but in their people.

Employees who ‘gave back’ to their employers in time not spent commuting was also an interesting element of the pandemic. Many people worked extra hours in the morning and afternoon where they would normally have been travelling on their daily drudge.

The report says:

“Budget preparation and capital planning exercises in Q3 2020 will be quite telling with respect to the pace of change and the actual modules to be changed. Aite Group expects the fastest changes to be undertaken to improve firms’ digital client engagement platforms.”

“While critical, and arguably most important for the long term, analytics capability upgrades will not be as urgently addressed, as the projected return on investment (ROI) for these upgrades is extremely difficult to calculate and validate, and implementation times can be long.”

In order to accurately gauge the impact of the COVID-19 crisis on the firms surveyed, Aite Group posed several detailed and business-specific questions. Fifty-four per cent of participants globally report their performance was negative or very negative; most Asian and European firms have been negatively impacted. In North America, only a few firms were negatively affected, indicating that these firms have benefited from their investments and the progress they have made in the area of digital transformation in recent years.

The ability to transition to a remote working environment, forced upon firms by the sudden government-issued lockdowns around the globe, appears to correlate with the question around business impact. Asian firms had the hardest time accommodating a remote workforce, with about half having been majorly impacted or challenged by office closures. Only a few European wealth management firms reported challenges, which is roughly in line with the global average, while only one firm in North American reported difficulties. Despite these differences, all the wealth management firms we interacted with in the period had in common to do their utmost to overcome these operational issues, protect their staff while maintaining a high level of service to their clients.

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Alexandre Duret
Alexandre Duret – Product Director, Wealth