Wealth Management Technology Trends in a COVID World

The wealth management sector was already dealing with significant challenges prior to February 2020. Since then, the coronavirus pandemic has introduced even more uncertainty, with millions out of work, a looming economic recession, and turmoil in the financial markets. 

Wealth management firms are having to act fast—focusing on survival, turning a profit, and meeting client needs against a uniquely difficult global backdrop.

Fortunately, we can look at how firms are reacting to COVID-19 and make reasonable assumptions about future wealth management industry trends—this can help you prioritize your own strategic technology spending. 

We’ve already explored some key, high-level strategies to meet changing investor needs, use digital transformation, and provide value-add services. We think it’s worth digging into how wealth managers will be using technology to deal with the current uncertainty while positioning themselves for future growth. 

We’ve based this wealth management technology trends article on a few different sources, including Deloitte and Celent. For more details, we recommend Celent’s 2020-2023 technology forecast and Deloitte’s white paper on disruptive trends in wealth management.

Wealth Management Trends: Transitioning to a Remote-First Approach

The health of clients, employees, partners, and others is a top priority for wealth management firms, especially with COVID-19 accelerating the shift to remote working arrangements. This remote-first approach extends well beyond the financial workforce though, with a need for more investment in remote onboarding, client communications, and advisory models.

The Client and Remote Wealth Management Advisor Relationship

With most wealth management interactions moving online, replicating the personal nature of an investor and their advisor becomes more challenging. 

Wealth management reporting has a big part to play in developing the client relationship. Providing clear, consistent, self-service insight to clients gives them a much better understanding of their investment position. Advisors can use personalized reports to contextualize and show how the client’s wealth is changing. 

Innovative advisor technology is seeing a significant upswing.  Artificial intelligence (AI) and machine learning (ML) capabilities can adapt and interpret data to help advisors create better investment strategies for their clients. Combining AI, reporting technology, and expert advice helps to drive up trust with remote clients.

Wealth Management Trends: Focusing on Tailored Strategies

Certain areas of the investment market are increasing in popularity—socially responsible or impact investing, effective risk management, robo-advisors, and more alternative options like real estate are attracting clients. Many firms are implementing ESG strategies to reduce risk and portfolio impact during the crisis and uncertainty around future market volatility.  

As “the personal touch” becomes more difficult in the shift to remote advising, you can start to plug the gap by offering unique mixes of products that serve niche parts of your audience. Providing unique investment opportunities that aren’t available elsewhere helps to retain clients. For those investors who have different priorities like ESG funds or radical portfolio diversification, developing new products that offer them convenient and easy exposure to those marketplaces can be tremendously helpful.   

Wealth Management Trends: Moving Away from Legacy Systems to On-Demand, Cloud-Based Services

The need for modernization has long been an issue for traditional wealth management firms that often rely on old systems and technologies. COVID-19 has made this more urgent—the demands of moving to remote working and communications, combined with shifting client expectations, is putting a strain on legacy systems.

The Need for On-Demand, Scalable Wealth Management Services

Replacing legacy systems wholesale is a resource-intensive and expensive process. The capital expenditure alone can take years to realize an ROI, and combined with the needs of integration and automation, can be cost-prohibitive.

This makes Software as a Service (SaaS) a natural fit. Wealth management firms don’t need to replace their legacy systems overnight, instead, they can transfer functionality a little at a time, learn from the experience, and use an iterative approach. For those firms worried about cost control, on-demand services mean starting small, and only increasing costs as demand and business grows.

The Move to Hybrid Cloud Solutions and Security

There’s a reason wealth management firms like to keep all their data in-house: Protection. Security engineers understand these aging systems and can maintain control of information. Fortunately, SaaS vendors are increasingly re-engineering security from the ground up, and building deep cybersecurity into their core offerings. 

For some wealth management firms, this won’t be enough. There’s an inherent distrust in sharing data and not having it entirely within their control. For these businesses, a hybrid or private cloud can be a great option. Depending on their configuration, private and hybrid clouds allow for extremely robust data protection, while providing access to on-demand cloud services.


Wealth Management Trends: Realizing Technology is an Enabler, Not a Replacement

As COVID-19 forces us to interact almost exclusively through our screens, it’s easy to believe technology is the most important part of wealth management. This overlooks something vital: Wealth management is a relationship-based business. Nurturing and cultivating trust is essential to success. 

You need to remember: technology is an enabler of that relationship, not a replacement for it. While it’s true that artificial intelligence, machine learning, and digital automation all have an important part to play, not a single one can replace the personal touch. It’s also true that some investors are increasingly moving towards self-service, and don’t find advisor services as valuable.

This trend means you need to reimagine the client relationship. How do you continue to offer personalized services while maintaining relationships at scale? This is why technology is more suited to your back- and mid-office functions than your front-office investor relations. 

Use technology to free up your advisors’ time, so they can add value to the client relationship. Be careful about going so far down the automation route that you end up throwing the baby out with the bathwater.

COVID-19 will continue to significantly challenge the wealth management industry. A focus on moving to a remote-first approach, transitioning to on-demand services, and using technology to free up resources for client management, can help to ensure your short-term survival and long-term success.

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