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The role of digital for business opportunities and ROI in wealth management

by wrich

By Will Bailey, Chief Strategy Officer, InvestCloud 

Business opportunities and the potential for greater return on investment can still be found within the wealth management lifecycle. Digital tools will get you there.

How? With the wholesale adoption of digital across all business functions – from front office communications, to middle office risk management, to back office processing and protocols. Digital plays a crucial role for the future of wealth management—allowing firms to harness disruptive trends, rather than be consumed by them. 

Recent times—even prior to the pandemic—has seen investors think differently about their approach to their wealth. We are seeing new competitive patterns, democratised asset classes, and a greater requirement for holistic, goals-based advice. All the while, fee compression is biting and many investors are taking the approach that wealth management is a service commodity.    

Digital is the answer to alleviating many of these problems. But only through strategic digital adoption can wealth managers harness this disruption and prosper in a post-pandemic environment.

Defining your North Star

First, it’s critical to get clear about your strategy. Wealth firms need to find their digital North Star—the technology that can help them achieve their most significant business goals.

Everything—all applications, functions, the very look, feel and usability – should be aligned to this North Star. This can take several forms, from an online conversion of the complete brick and mortar experience, or a fundamental redesign in order to attract a more diverse range of new clients or open new business lines. 

Finding the North Star comprises of two parts. The first, a design study to understand what you and your clients want, and second, a functional study to understand the needed features. This forms the backbone of creating a digital experience. Everything should be implemented to achieve this North Star. If done correctly this is how you ultimately delight clients, offering them value digitally and retaining them for good.

The need for AI and machine learning

If finding the primary goal of digital is the why of digital adoption, then the specific technologies that require implementing is the what and the how. Wealth managers would be wise to look at the impact artificial intelligence and machine learning will have on their business. 

Both have the potential to massively streamline operations—from how business operations can be largely automated, to hyper-personalising the client experience. 

From an operations perspective, heavily manual processes can be simplified and automated, which allows wealth managers to focus more on the client. It also means they can effectively service more clients without compromising on service quality – meaning more assets under management. Essentially, wealth mangers can only be concerned with creating additional value for the business.

Business process automation can unlock even greater value for businesses. New revenue streams—such as financial planning, ESG, etc.—can easily be adopted without placing additional burden on resources. This is crucial as wealth firms look to diversify and grow.

From a client perspective, AI and machine learning means their experience can be completely unique to them. Modern investors are well-versed with platforms and services that are tailored to their exact needs and wants. Wealth management should be no different. 

The same personalisation technology can then be used by the wealth manager to pre-empt and predict client needs. Imagine being able to solve a client’s needs before they come to you with them? This is what automation can bring.

AI and machine learning optimises client engagement at scale. It can define the next best actions via recommendations that use narrative reasoning, based on analysis of products and stocks within a client’s portfolio. This drives further efficiency while creating greater value in client interactions and investment decision-making.

Understanding New Think 

But even with the right tools in place, it is still easy to fall into the technology traps of the past. 

Digital adoption has too often been piecemeal in approach. Different vendors, providing diverse, sometimes individual elements and functionality. This serves to create a disjointed patchwork of differing technologies, and usually results in an expensive to maintain system with a poor user experience from both client and manager perspectives. 

This is old think. Wealth firms need to adopt New Think.

This manifests in a simple principle: that digital transformation must start with the user. It means a single, coherent experience end-to-end. It also means needing to adopt Digital Empathy, the ability to ensure online platforms and services resonate with the individual.

Digital Empathy starts with good design. Is the experience easy to navigate, is it attractive, does it make you want to use it? Once answered, implementing Gaming Theory—a set of abilities to encourage users to engage with you, from push notifications to progression dynamics—ensures the experience sticks with users.  

Next is Decision Theory. This is the ability to persuade clients to undertake certain actions as well as ensure advice is properly conveyed. This includes how wealth managers can avoid clients anchoring on certain aspects and ignoring the bigger picture. Wealth firms can then leverage Data Science to ensure complete process optimisation and derive better experiences based on the user’s actions. 

At each stage, wealth managers collect learnings on how to better improve the experience, which can then be implemented by going back through these steps. 

Digital Empathy means increased engagement. It creates a win-win for both clients and providers: higher satisfaction and greater loyalty.

A successful digital journey must start with your digital user. Embracing New Think can be a challenge, but when the penny drops, the increase in client engagement, retention, growth and operational efficiency creates new believers and new opportunities.

Digital creates greater ROI

Embarking on a digital journey can be a difficult task. But, if the North Star is identified and the right technologies put into place, then wealth firms will be on a good start to the digitalisation of their business. 

But where digital truly exceeds expectations is through the adoption of New Think as the guiding principle. Don’t just build a new client platform. Make it desirable to use and give users a reason to keep coming back to it. Lead with design, and build functionality around the individual user. 

Disruption can be an opportunity. If wealth firms harness digital correctly, great business value and improved ROI will follow.


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