Your wealth management firm is facing increased performance and profit challenges from multiple sides. A combination of regulatory burdens, fintech disruptors, greater consumer choice, low-cost passive funds, and unpredictable financial marketplaces means you need to squeeze every last piece of value from your margins. You need diverse wealth management strategies, underpinned by strong fundamentals and principles.

We’ll explore three potential ways you can help meet the needs of a changing customer base, use automation to maximize value, and diversify your wealth management firm with add-on services. 

1. Meet the Needs of a Rapidly Changing Wealth Management Customer Base

Customer expectations are evolving quickly, and wealth managers must adapt to changing behaviors, channels, technologies, and beliefs. A Deloitte paper, “10 Disruptive trends in wealth management,” describes this as investors becoming “re-wired,” resulting in profoundly different perspectives:

• Meet my specific requirements: Investors don’t want to be treated as part of a group (e.g. high risk, high reward), but instead as individuals, with unique needs and opinions based on their personal circumstances. These investors are typically more skeptical of authority and general advice.
• Give me choice and control: Investors expect immediate, anytime, anywhere, digital access to their finances and investments, and the ability to make wealth management decisions in real-time. They expect their choices to be acted on immediately so they can seize investment opportunities.
• I am the decision-maker: Although the modern investor may want tailored financial advice, they also feel informed enough to make smart investment decisions. Whether that comes from the wisdom of the tribe, increased exposure to financial information, or gut instinct, it’s a powerful motivator.
• Help me minimize the downside: Risks need to be presented as real downsides, rather than abstract numbers or warnings that investments can go down as well as up. Modern investors are more interested in hedging and other sophisticated tactics to reduce downside risk, rather than simply diversifying their holdings.

 

Changing Customer Expectations and Your Wealth Management Strategy

There are several ways to build stronger wealth management foundations and strategies that meet the needs of a changing customer base:

• Make it Personal: Speak to the individual investment journeys of your clients by sharing how their investments are helping them accomplish their long-term goals, not just meeting industry benchmarks.
• Diversify the advice you give: Skepticism about authority means investors are less likely to listen to high-level advice. Instead, allow for multiple voices, advisory models, and perspectives around wealth management, bringing in the “wisdom of the tribe” and social proof.
• Give Greater Insight Into Risk: Deliver a variety of risk reporting narratives that provide transparency and allow them to make more informed decisions about their investments.
• Give all investors access to high-yield assets: You need to democratize investment products and remove barriers to financial instruments that were previously only directed at the wealthy.

 

2. Take Advantage of Wealth Management Automation and Digitization

“Digital transformation” is the watchword for businesses right now. Used correctly, it’s a powerful way to streamline wealth management processes and invest in the areas that deliver the most value and ROI. Ernst and Young explored this in a paper, “Accelerating the transformation of wealth management through digital technology.”

Their analysis found that:

• Best-practice wealth managers invest more in the front-office and customer experience, and outsource a greater portion of their back-office functions to specialized vendors and providers.
• Wealth managers tend to delay upgrading their back-office and IT systems, often creating more cumbersome and inefficient processes that require manual intervention and rework.
• Back-office executives in wealth management businesses need to take a leadership role in retooling, outsourcing, and automation and align their budgets with the most important digital priorities.
• It requires considerable effort and alignment to realize benefits from back-office outsourcing. Maximizing the value of outsourcing relies on three elements:

1. An expert, committed provider.
2. An optimized relationship between the wealth management firm and the services provider.
3. Strong in-house back-office integration.

Outsourcing, Automation, and Your Wealth Management Strategy

Digitization and outsourcing make it easier to understand ROI, enhance the customer journey, and scale appropriately with business needs. There are several ways to implement this in your wealth management strategy:

• Carry out a time, resource, and cost audit of your key wealth management processes. Understand their impact on your expenses, including hidden costs. Take account of lost opportunities caused by erroneous, delayed, or inaccurate wealth manager functions.
• Prioritize the parts of your IT and back-office tools and processes that you want to outsource and automate. Focus on areas that enhance the client’s wealth management journey and allow you to meet changing customer expectations.
• Speak to vendors and develop strong business cases and projected ROI for outsourcing and automating discrete parts of your wealth management back office.
• Use a phased approach to gradually bring in outside vendors and integrate them with your wealth management systems to understand the benefit and impact. As you realize gains, expand your vendor relationships to cover more processes and systems.
• Ensure you do not lose in-house IT expertise. The institutional knowledge already in your business will strengthen integration and let you maximize the value you get out of your outsourced technology and processes.

 

3. Provide Value-Add Services to Wealth Management Clients

With so much competition in the wealth management marketplace, it makes sense to have a deep focus and expertise in niche areas. Although automated investment platforms and FinTech disruptors are capturing market share, there’s still room to add value in other ways.

Due to the modern investor’s distrust of authority, and the difficulty of scaling face-to-face advice, these value-add services can be productized and packaged to make them more attractive to clients. This allows your wealth management firm to offer unique services that can attract investors with specific needs.

Value-Added Services and Your Wealth Management Strategy

The value-added services you offer will depend on your in-house wealth management experience, your ability to productize that expertise, alignment with client needs, and the ability to scale. Examples of where you might provide value-add products include:

• Ethical and socially responsible investing: An increasing focus on environmental stewardship, concerns about global supply chains, and climate change means investors are increasingly putting principles in front of profits. Offering investment products that allow for more ethical choices taps into that demographic.
• Goal-Based Reporting: A goal-based reporting solution enables wealth management firms to communicate their clients’ unique investment story in an automated way that fosters engagement and long-term relationships.
• AI, NLG, and Machine Learning Solutions: AI technology solutions can serve as a recommendation engine that provides intuitive guidance and actionable narratives by generating predictions, correlations, benchmarks, outlier identifications, and optimizations giving your wealth management firm an edge in the marketplace.

We hope you’ve found this guide to diversifying your wealth management strategies useful. Getting a deeper understanding of your clients, maximizing the value of your back-office functions, and productizing niche services will all help to strengthen your approach and win you more business.