Digital transformation is at the heart of an ongoing shift within the Wealth Management industry, much like most industries. There is a new generation of customer – tech-savvy individuals needing a personalised and engaging experience. With a shift towards digital, new challenges and opportunities have presented themselves. KPMG’s Matchi team has explored a few trends that are here to stay.
1) Fees are compressing
Fees for products and advice will continue to compress in 2019. Product manufacturers will feel the pressure of a more efficient, diversified, and competitive marketplace. Technology-created new layers of transparency and access will pressure financial advisors to implement competitive fee arrangements.
2) Strategic product partnerships are changing
The industry is seeing a return to the mutual fund family as wealth management firms and broker-dealers seek to maximise their partnerships and revenue arrangements with fund companies. Firms with product breadth, strong performance, financial stability, and deeper pockets for support are desirable partners for broker-dealers and wealth management providers.
3) Home-office models come into focus
The focus and growth of the model portfolio marketplace is driven by the perceived commoditisation of asset management, growing compliance risks, and fee pressure. Home-office and third-party models provide a solution for financial advisors seeking to outsource their role in managing assets and frees up capacity for financial planning.
4) Sustainable investing taken seriously
Offering clients investment opportunities that not only make them money but also resonate with their personal beliefs. Wealth managers will carry over their environmental, social, and governance philosophy into their approach to financial planning and support services offered, and in creating a more sustainable office environment.
5) Privacy will be an increasing priority
The financial wellness movement provides the financial advisor and investor with an authentic understanding of today’s financial picture with a personalised and potentially real-time view of the future. Data availability, technology sophistication, automation, integration, and societal changes bring rigor to unprecedented personalised planning.
6) Digital is considered firm-wide and strategic
Firms are redefining their digital strategies, taking a comprehensive approach, and expanding across business lines, advisor segments, and client age and affluence levels. Firms have begun centralizing their digital strategy management and incorporating all business groups and stakeholders, creating in-house incubators and accelerators to develop a digitally savvy culture.
7) Hybrid model is defined and refined
The hybrid model is best placed to evolve and meet the rapidly changing needs of investors and further evolve. As a response to the B2C robo-advisors as well as changing client behaviors and demands, incumbents will focus on having a clear strategy around the hybrid propositions they are launching as opposed to adding to a stream of similar digital offerings.
8) Data as a differentiator takes center stage
Wealth managers are keen to leverage data as a differentiator. It is imperative to turn big data into bite-sized information that is relevant to each client. A way for firms to differentiate themselves is by giving clients tailored and positive customer experiences, and if data is correctly managed, it will minimise customer churn, fraud, and default risk.
9) AI creates excitement
The largest firms have already created teams, establishing their approach in pilots that are now returning longer-term results. Financial institutions will expand the AI effort across the organisation into new domains. But groups still debate, risks exist, and internal resources still negotiate, given AI tools’ newness.
10) APIs impose system change
Vendors to the wealth management industry are increasingly delivering their capabilities through APIs. They will have to accept that this new model of access to their platforms might significantly alter their competitive positioning and economic model.
Whether you’re a specialist bank or asset manager, it’s time to explore the ways in which technology can help you deliver the best service to your clients. Whether you need tools for communication, engagement and report, or platforms to enable financial planners to access information and advise clients. There is a fintech solution to suit your needs. It’s all about finding the right match. Speak to us today.