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M&A in Wealth Management

by jcp

Wealth management firms will turn to personalised services and M&A to manage market uncertainty and grow. Richard Gibson, financial services market specialist at Xpedition, looks at how customer service could transform with this strategy.

Acuity Partners’ latest global research indicates that global volatility and rising inflation are a cause for concern for firms wanting to grow in the year ahead. I know from working with leaders from across the industry they are looking at ways to ride the storm. For some there will be a concerted strategy of M&A as they buy their way into new markets and acquire customers. 

However, for others there’s a different strategy emerging, one that puts their clients at the heart of everything they do. These wealth managers are looking at ways to offer a more tailor-made service. 

It’s well founded, especially as the study also revealed that personalisation and access to 24×7 support is going to become increasingly important to younger generations of clients. What’s more, Gen Z clients want their specialist advisory service to come with a digital experience. That said, it’s worth noting that the pandemic has moved many other demographics online and to mobile apps too. Older generations are more comfortable using the web for shopping, mobile banking, and apps like Zoom and WhatsApp for keeping in touch with family.  An inclusive digital strategy must therefore work for all and not the few. 

The advent of M&A to get digital

Delivering a digital experience is a complex beast. It’s not something that can be switched on overnight, especially if there’s a dependency on legacy systems. That’s why, in some cases, M&A could be a fruitful strategy to follow. 

‘Digital disruptors’ in wealth management, and those managers that have made headway in establishing digital customer experiences, could become targets. We have seen a similar story play out in in the insurance sector where incumbent brands have used M&A to preserve or extend their market position and get access to the innovation they don’t have or can’t build quickly enough to compete. Using M&A in this way, helps to rebalance some of the so called ‘technology debt’ that legacy systems create. 

The final reason why M&A activity is appealing, relates to data. Digital first organisations have access to newer, richer customer datasets so decision making is better informed. For example, data that provides real clarity on how customers behave can help support the creation of more bespoke products and services for subsets of customers. In short, personalisation is more attainable. 

Personalised services – a critical battleground for acquiring loyal customers

The case for personalisation is strong and grows ever more so – around 80% of people will pay more for a tailored customer experience. In the world of wealth management where time is money, 24 x7 services, and up to the minute updates are becoming a ‘must’ for those choosing a wealth management partner. As a result, it’s becoming imperative to provide a customer-centred experience. 

In an industry where customers will scrutinise the value they get from their partner and investments, digitalisation will become a critical battleground. It’s likely that economic volatility will only heighten this, and drive more appetite for a seamless, personalised, and real-time experience. Digital strategies will become essential to not just win customers but also secure their loyalty, a factor that is becoming ever more important as the squeeze of fees continues. 

Becoming a digital first organisation through M&A

There is a persistent truth when following an M&A strategy to acquire innovative technology – merging different technology stacks, data sets and service models is complex and can be destabilising for a time. 

Firstly, there’s the task of where to start when blending technologies and processes together. The scale can be enormous, and projects can quickly become multi-year and costly. It’s not uncommon for the investment to be delayed until the conditions are ‘perfect’. However, this defeats many of the original objectives of the M&A. 

It’s fair to say there is no right time and there will be elements of risk. Treating the situation like you would an Elastoplast is never a bad thing – the longer you leave it the worse it will be. So better to take the brave step and do it sooner than later. This will encourage the much-needed mindset of decisiveness whereby the priorities can be established. 

These should centre around the vision the business has for customer experience – what should it look and feel like? What added value can it bring to the customer? What needs to be self-service, what processes need to be guided more precisely by managers? Is it online or mobile? What could success look like – how will it be measured?

It’s extremely important not to overlook the employee experience as part of this exploration. If you want managers to deliver part of the experience, then you must give them the tools to do it. Ask people how digitalisation can make their working life easy and more productive. After all, if they have a good experience then they are more likely to stay loyal too. 

In my experience, successful integration projects must do this, recognising the change curve employees go through when it comes to adopting new technology and ways of working. If users are consulted on their requirements and have a say on the selected systems and processes, then they will be more likely commit to adopting to the changes a firm is looking to implement.

Armed with this intelligence, it’s then possible to set out a plan for success. However, if there’s any hesitation, then working with an experienced partner who can identify the areas of focus will be hugely worthwhile.

Getting data right

Whether M&A is pursued for growth, new market entry, technological advantages or customer acquisition, there will always be the thorny issue of amalgamating data. It’s an inevitable outcome of the strategy, but it must be approached the right way or the reasons for M&A will be undermined. 

While there will be motivation to progress a new era of customer experience, it’s vital this doesn’t cloud judgement. Drawing data from different data repositories can feel like a fast start to transforming the business but if the data quality is poor, it will translate to a poor experience for teams and customers alike. 

Data must be valuable and trustworthy. To achieve this, datasets must be comprehensively reviewed, where duplicate, out of date or error prone data is removed or cleansed. This ensures everyone has accurate information to work from and can pull reports that have integrity. 

This process can have cultural ramifications too. As organisations grow through M&A there can be friction in terms of who owns data and how it is data managed and shared. Failure to address this can lead to silos emerging, and / or people to claim ownership and not share intel. This helps no-one. The ideal scenario should be transparency across all teams. Be it marketing, distribution, relationship managers or advisors, they should all be able to see a single version of a customer’s data and be able to make decisions together on the best approach for managing a customer’s total experience.  

This leads to the third reason why good data matters – employee experience. As we’ve already noted, technology and process need to be introduced in consultation with the people who will be using them. The same goes for data – how do people want to access and use data? 

This helps to improve data literacy which in turn promotes data sharing and encourages employees to ask the right questions of the data. It can also be fundamental to knowledge sharing. There is a plethora of analytical tools that managers can use to mine the data for gold. By drilling deep into the data, teams can unearth insights that can be used to develop their customer strategy. What’s more when everyone understands the value of using data this way, the culture changes and insights are more readily shared and communicated in a meaningful way across the organisation. Supporting frictionless and personalised customer journeys becomes the norm. 

Given the complexity of merging technology and data, and setting a data and digital first culture, it can be advantageous to appoint a Chief Data Officer (CDO). They can take responsibility for the full co-ordination of data, and oversee how it is merged, standards for use and compliance and get teams aligned so they realise the full potential and value of data. At the same time, as we move into an era where artificial intelligence is more readily used, so there’s greater responsibility in using data properly. A CDO can ensure due diligence is always applied and that data is used appropriately when building customer experience models. 

The world is in state of flux, what people want is too. Being focused on the value you can deliver to customers every day must therefore be an imperative. That’s why believe it’s the managers that pursue their digital transformation and M&A with absolute clarity that will succeed. 


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