Up Close and Personal: How Wealth Management Digitalization Can Enhance the Human Touch

In the digital age one size fits nobody. Banks and wealth managers must heed this truism because investors’ demand for personalization and advanced digital engagement is growing – and it’s not limited to the young. This blog explores how wealth managers can offer exceptional personalized service in a digital world.

Research suggests that 64% of millennials and 51% of investors age 35-54 are willing to pay more for personalized investing products and services. Increasingly, banks and wealth management firms must understand each client’s exact needs, so they can align specific preferences with the right tools and expertise to deliver an engaging experience augmented with the human touch. Personalization is quickly moving from a matter of individual client preference to a universal expectation.[1]

A recent survey found that only 19% of wealth management firms felt able to give their firm a “5 out of 5” rating for digitalization.[2] Meanwhile, their customers want self-service tools and customization, such as direct indexing for personalized investment offerings. Clearly the industry has work to do. Where should firms start?

Know Your Clients

The dynamics of the industry change constantly but the name of the game remains the same: Wealth managers must offer services that attract and retain clients. Effective portfolio construction and periodic rebalances remain very necessary, but those things alone do not differentiate one wealth manager from another. 

With the right approach and modern tech, firms will become more agile, client-centric and productive. Successful client acquisition and retention means first understanding which investment opportunities individual clients want to pursue and why, and how they wish to interact with their investments and their advisor.

Meet the Needs of Ethical and Emerging Investors

Banks and wealth managers need to consider the rise of the “ethical investor” as well as Environment, Social and Governance (ESG) factors, an expanding array of investment options, and changing demographics. These are moving targets that encompass an increasing range of elements.

Today’s clients increasingly seek to invest in instruments that are aligned with their specific needs, views and values. Simultaneously, the list of potential assets grows daily – including crypto, digital assets, pre-IPO and direct indexing, to name but a few. Wealth managers who ignore these do so at their own peril. There is a clear and present need for future-proof technology that can accommodate an expanding array of asset types.

Individual clients put different emphasis on specific aspects of ESG investing, and standards are evolving fast. With ESG in the spotlight, wealth managers will need to answer a growing number of questions from clients. They need access to quality supporting data and solid research tools to offer personalized and timely advice on ESG investments and strategies. Well-informed and tech-enabled advisors play a crucial educational role in helping clients understand and appraise ESG investment opportunities and evaluation criteria.

The dynamics of the wealth management client pool are constantly evolving, including expanded representation by minority investors and women. For example, research confirms that by 2030 women will control much of the $30 trillion in wealth that baby boomers possess. The same research shows that 52% of women already have a financial strategy, with an additional 12% interested in developing one. The message is clear: Wealth managers must do more to help women prepare and those who do will be well rewarded.[3]

More consistent information and metrics must become available so all clients can become better informed; in turn they will also become more demanding. Get ready!

Build Profitable Relationships

Wealth management has always been a relationship business. In the past, providing personalized service limited the number of clients a wealth manager could support without compromising service quality. Today, technology is changing this dynamic for the better. Managers can now harness technology to offer better service to a larger client base, successfully servicing clients who increasingly welcome digital interactions.

Self-service that embraces digital and AI empowers managers to offer low-cost investment solutions to the mass market, while digitized workflows, data aggregations, and holistic client views allow for more personalized interactions between advisors and clients. Furthermore, with the right approach and modern technology, wealth managers can also serve a larger overall client base, including the segment that spans the lower end of High Net Worth individuals to the higher end of the Mass Affluent.

Approximately 46% of clients are happy to receive advice digitally, so there’s scope for managers to develop hybrid models that can simultaneously drive personalization, personal engagement and digital interaction to meet individual client’s wishes.[4]

Clients typically need varying levels of personal service at different stages of the investment lifecycle. According to EY, 44% of people prefer in-person contact when creating a financial plan, while 48% of respondents prefer to complete routine transactions virtually. The same survey confirms that 82% of respondents regard creating a financial plan as most important.[5] 

Combine Advanced Digital Capabilities with the Human Touch

As in all aspects of financial services, bank and wealth management clients increasingly expect choice and flexibility in how they interact with their wealth manager. Many clients still value human interaction and increasingly expect to be able to interact through video, chat and mobile. With modern technology, wealth managers can also meet clients where they are, and access all the relevant information on a tablet or other device. 

According to Refinitiv, 58% of advisor-led clients and 62% of hybrid advisor and self-directed clients still value advisor recommendations as the most reliable source of information. But human interaction and technology are not substitutes, and 40% of US investors confirm their advisor’s social media presence is an important part of their relationship.[6]

Embrace Data and Advanced Analytics

This is the age of the Great Client Experience, and wealth management is certainly no exception. Amid rising competition, wealth managers must keep pace with technology advancements, and utilize data and advanced analytics to enhance the client experience.

Data and technology combine to form the backbone of an analytics-led transformation. To be truly personalized, wealth managers must offer clients freedom to choose how they interact. With the right approach, every client interaction becomes an opportunity to learn more about client preferences and specific requirements.

To an extent, some of this information may already be available, but is often stored in multiple systems – even on paper or in advisors’ heads. To turn client data into insight it must be captured digitally, structured and stored in a way that can be analyzed and accessed securely by authorized persons and systems who need it. The emergence of AI and machine learning can provide Next Best Action recommendations, detect patterns and identify anomalies so that advisors can take a proactive approach to their clients’ investment needs.

Modern technologies can also be harnessed to collate client interactions across channels and to build a feedback loop to facilitate continual improvement. With a unified technology stack, wealth managers can develop a tech-first approach to designing customer journeys.

Think Beyond Technology

Wealth managers require modern technology to keep up with change, remain competitive and become data driven to better serve their clients. But business transformation is also about the organization’s culture. Throughout the wealth management industry, relationship managers typically spend 60-70% of their time on non-revenue-generating activities, including meeting regulatory compliance obligations.[7]

To deliver a permanent transformation, new technology must be accompanied with new ways of working – away from paper and spreadsheets. As clients demand more remote engagement and new channel options, managers must transform their operations to reflect this new reality.

[1] https://www.refinitiv.com/perspectives/future-of-investing-trading/how-hyper-personalisation-is-key-to-success-in-wealth-management/

[2] Tech & ops trends in wealth management, 2022

[3] https://www.fastcompany.com/90897283/women-in-the-u-s-are-about-to-gain-significant-wealth-heres-what-that-means

[4] https://www.ey.com/en_uk/wealth-asset-management/how-will-wealth-managers-deliver-personal-service-in-a-virtual-world

[5] https://www.ey.com/en_uk/wealth-asset-management/how-will-wealth-managers-deliver-personal-service-in-a-virtual-world

[6] https://www.refinitiv.com/perspectives/future-of-investing-trading/how-hyper-personalisation-is-key-to-success-in-wealth-management/

[7] https://www.mckinsey.com/industries/financial-services/our-insights/analytics-transformation-in-wealth-management