Transformation
As we navigate through the second quarter of 2024, the wealth management industry is indeed undergoing a significant transformation, driven by technological advancements, data analytics and artificial intelligence (AI), regulatory compliance, changing client expectations, and evolving market dynamics.
In a hyper-competitive and rapidly changing operating climate, the key to success in the industry lies in developing and maintaining client-centric strategies that prioritize client needs, build trust and loyalty, provide holistic advice and solutions, adapt to changing preferences, and drive business growth.
In an era of evolving consumer expectations, service delivery methods, and client engagement platforms are reshaping how consumers perceive financial services and what they expect from wealth management advisors and firms. In this landscape, firms that prioritize being client-focused and improving technology have significant competitive potential.
Research conducted by Advisor360°, a company that offers integrated technology solutions for wealth management firms, found that a staggering 92% of financial advisors would be willing to leave their current firm over poor technology. In fact, 44% of advisors reported that they have already done so.
The findings demonstrate that the next generation of wealth managers expects more from their technology stack to better serve their clients. Nearly two-thirds (65%) of the 300 respondents felt their IT setup needs improvement.
“The advisors in our survey expressed candid concerns about their technology and the data driving it, making clear that both impact the growth of their practice and their overall satisfaction,” said Jeff Schwantz, CRO of Advisor360°. “If attracting and retaining advisors is a priority for enterprises, providing them an integrated, automated platform experience is essential.”
The findings indicate that advisors are increasingly dissatisfied with the tools they have for engaging with clients and winning new ones. According to the survey, 58% of respondents stated they lost business in the last year due to poor technology, while 92% lost revenue in the previous two years.
In contrast, outstanding technology provides advantages; 93% of respondents who rated their technology as cutting-edge reported obtaining new clients because of a competitor’s poor technology.
Kidbrooke, a wealthech platform, recently explored the top trends impacting wealth management this year and discovered that the resilience of the industry hinges on its ability to leverage technology effectively to address tightening margins and demanding regulatory standards.
The increasing focus on generative AI reflects a significant technological shift in the industry, with firms increasingly leveraging AI to drive innovation, enhance operational efficiency, and elevate customer experiences. The forecasted market valuation of more than $66 billion for technology providers in 2024, rising to $207 billion by 2030, underscores the growing importance of AI in shaping the future of financial services, noted Kidbrooke.
Finastra’s State of the Nation Survey underscores the wealth management sector’s investment patterns, highlighting a robust focus on digitalization through generative AI, embedded finance, and Banking-as-a-Service (BaaS).
Embedded finance has emerged as a key driver of company innovation, revolutionizing traditional banking models by integrating financial products and services into consumer experiences across various industries.
This booming business, which reached a $2.6 trillion valuation in the U.S. alone by 2021, is expected to capture more than $7 trillion in transactions by 2026, according to Kidbrooke, citing Finastra data.
“Embedded finance has a far-reaching impact. It extends across various industries and reshapes the landscape of financial services,” said Fredrik Daveus, CEO of Kidbrooke. “It democratizes access to financial tools, making them more accessible to a broader audience. It also fosters innovation in how financial services are delivered and consumed.”
The goal of consistency in client engagement also highlights an important trend in wealth management. The move to digital platforms, which was confirmed during the pandemic, necessitates a unified approach to customer support across digital and physical channels.
According to a McKinsey report, digital adoption has progressed from a question to a tangible reality, with around 73% of global interactions with banks now occurring via digital channels, pushing relationship managers to develop new tactics to provide a smooth experience.
Kidbrooke’s unified analytics approach, as explained by Daveus, exemplifies the industry’s move towards integrating cross-functional data to enhance decision-making and client engagement.
Meanwhile, strategic data management has emerged as a significant concern in the context of digital transformation, as highlighted by Kidbrooke. Financial institutions are increasingly recognizing the importance of effective data management strategies to unlock the full potential of their digital initiatives and drive innovation.
This strategy supports the gradual rollout of digital services, allowing for real-time improvement depending on user input and market conditions. The agility of wealth management firms allows them to effectively address customer needs and adapt to technological changes, ensuring their continued relevance in a quickly changing financial environment.
