Wealth management: Evolving the role of wealth advisor for a digital future

Expectations of both the relationship manager and the customer are shifting. The typical investor profile is not only evolving, but bringing with it a host of new demands rooted in the expectation that services are instant, personalised, and offer a pleasantly seamless customer experience.

The role of wealth manager leans fairly heavily on sales and relationship management, with a strong focus on financial education. Historically, the role has not included provision for the smooth integration of technology, nor the assimilation of data into processes which will work to unlock potential for continuous improvement.

Down the line, it is inevitable that there will be strong digital elements embedded within this client relationship, including tools and features from across the ecosystem such as the use of data and AI to improve the customer journey. However, arriving at this digitally-powered destination will be a significant task that institutions and individual advisors must drive ahead.

This article reveals key insights from Cognizant, SEI, J.P. Morgan Private Bank, UniCredit and independent advisors, to understand how wealth managers will need to reflect and cater to the needs of the next generation of customers, which highly values diversity, ethics, and the environmental impact of their investments.

When considering the profile of a traditional wealth manager, the demographic information around these individuals is fairly homogenous. Statistics from the Certified Financial Planner Board of Standards show that females currently comprise just 23.6% certified planners in the industry, with white professionals accounting for 82.5% of the industry, and just 28.4% of certified professionals under the age of 39 years. These are dramatic statistics, and while slowly improving, represent a number of challenges the industry must address in order to evolve into the future.

Once we see greater technological improvement emerge more clearly across the industry, we will witness the potential of wealth management working to close the advice gap, rather than remaining the sole preserve of high net worth individuals.

Are wealth advisors or relationship managers able to find a ‘hybrid’ medium?

The traditional world of wealth advisory has relied and still does rely on a heavy face-to-face relationship with the client. While certain technologies have impacted the profession, wealth management has not experienced the front-to-back digital transformation that has been evident across most other sectors of financial services.

Depending on which segment of the wealth management being discussed, the uptake of tech solutions to improve the customer experience varies significantly.

The use of the term ‘hybrid’ emerges frequently in discussions around effective digital transformation, with the objective being to achieve a happy balance between face-to-face engagement, and targeting technological solutions at various points of the traditional journey to improve the overall customer experience.

Sam Beeby, associate director, wealth and asset management practice lead for Cognizant, explains that we first need to unpack the use of the term ‘hybrid’ in the wealth management context before diving into its successes or weaknesses.

“While the term ‘hybrid’ has dominated the conversation around wealth management for some time, the term is too broadly used, as it captures some degree of human interaction and technology, without breaking down that combination in any way,” notes Beeby.

“It could mean human supported digital experiences, it could mean digitally supported human experiences – there is a functionally infinite spectrum between these two things. This brings us to an inflection point, where the permutations of this combination are bubbling to the surface.”

Some models tend to resonate better with customers, while others show greater business viability.

Rob Wrzesniewski, head of global solutions for SEI’s Private Banking and Wealth Management business, states that over the last few years, there has been a seismic shift in consumer expectations for easier digital experiences.

According to Wrzesniewski, from retail to fitness, consumers have come to expect low friction, personalised experiences, and the wealth management industry is not immune to those expectations. “Wealth management clients now demand digital experiences that fit into their lives rather than disrupting it. This makes collaboration between consumer and wealth manager more important than ever, and technology plays a key role in enabling that customer journey.”

Renato Miraglia, head of wealth management and private banking, Italy, at UniCredit, adds that we operate in a very competitive market, with evolving market conditions, and importantly, evolving client needs due to ageing, wealth transfer, the growing presence of women and millennials, and increased investment in ESG products. “Technology that makes extensive use of data supports us in this regard by making it easier to run risk models and conduct financial assessments to manage clients' financial and business assets.”

While Miraglia explains that UniCredit believes human beings will continue to be essential in the relationship with private and wealth clients into the future, the use of data and technology will change the analytical tools with which client materials are produced. He cites the value of generative AI to create highly personalised and detailed real-time reports and analyses on the peculiarities of each client’s position.

“The wealth manager of the future will use new and sophisticated tools to analyse risks and investment opportunities – and this will improve the accuracy of financial planning. The next generation of tools consider key elements in an integrated way, taking a holistic view of factors such as the interaction with real estate or business assets, changes in lifestyle, and elements of risk that can be secured through various forms of insurance,” Miraglia elaborates.

Injecting data-driven digital experiences into the wealth management space will benefit all points of the industry’s value chain. Wrzesniewski argues that this will allow wealth managers to provide their best service across all consumer segments—not just their top relationships. However, in order stay competitive, wealth managers will need the technical talent and infrastructure to deliver these data-driven experiences, which can be “daunting but very achievable with the right technology platform partners,” according to Wrzesniewski.

How advisors should frame their approach to service in the digital age

There are three key pillars or categories of change that businesses must think about when approaching the function of the relationship manager within their business, Beeby outlines:

1. Winning the hearts and minds of traditional relationship managers, to ensure they understand that if they embrace the potential of technology, it will be seen as a strength rather than a threat.
2. Firms should carefully consider how to deploy technology to relieve the operational and administrative burden on wealth managers, freeing them up to focus their time on customer relationships.
3. Ensure the digital customer experience becomes the focus, by designing an optimal coexistence between the digital portal and human experience.

This line of thinking is echoed by independent chartered financial planner, Victoria Nabarro, who sits on the “holistic financial planning side” of the industry, at 28 years old represents the new guard of wealth advisors. Having spent the beginning of her career cutting her teeth in the corporate world, Nabarro is acutely aware that her industry is saturated with older professionals, largely male, typically servicing high net worth clients.

“Sadly, while every other industry around us seems to be advancing hugely in terms of technology and how a particular service is provided, our industry is hugely lagging in that respect.”

Nabarro continues: “The problem is that while we’ve seen some innovation and some steps forward, they have been very small, and advisors are still using a lot of old legacy systems. This means advisors spend too much time in the back office, unable to give our customers the time and attention they need without other parts of the business suffering.”

Are wealth managers open to using technology to their advantage?

While some tech solutions have entered the space, they haven’t been sufficiently disruptive or revolutionising as to drive meaningful transformation throughout the value chain and on to the end customer.

Beeby laments the 10 years where robo-advice dominated the conversation around wealth management, stultifying progress toward adoption of tech solutions in the industry.

“There is a well-trodden narrative that when robo-advisors emerged, everyone thought they would be the future and that human relationship managers’ days were numbered. Naturally, this didn’t come to fruition, which unfortunately cemented the old guard’s conviction that technology won’t noticeably change the nature of relationship management in wealth,” states Beeby.

The wealth management industry is currently lagging others in its ability to deliver on customers’ digital experience expectations, argues Wrzesniewski. Customers get more transparency into the status of an online retail purchase delivery, for example, than they do for their life savings moving to a new institution. “Wealth management firms have come a long way in modernising the technology platforms needed to improve consumer experiences. Specifically, the fintech space has used integration technologies like APIs to move customer data between standalone technology platforms, which has benefitted all sides of the relationship. But more work is needed to remove friction that exists between these technologies and is revealed to consumers every day.”

Nabarro concurs, outlining that the challenges with the current customer journey is that advisors generally tend to be great and building relationships with their clients, however, as advisors cannot feasibly give clients one-on-one updates on each step of the behind-the-scenes process, customers become extremely frustrated at the slow pace and lack of transparency.

She reasons that it is not possible to sit with a client and give them a straightforward recommendation around taking money from their pension immediately, for instance. This arduous process can lead to a lack of trust from the client.

The reality, Nabarro elaborates, is that it is commonplace for firms to keep an excel spreadsheet or some sort of manual tracker that keeps the details around when clients were last contacted. Resulting in a clunky, opaque, and slow journey.

Miraglia feels it is difficult to imagine a future for the wealth management industry that doesn’t involve accompanying clients through innovation in various dimensions, but today’s technology makes it possible to enhance the value of that advice and strengthen various components of the service.

Where is technology currently being used by wealth advisors?

The answer to this question largely depends on which point in the spectrum of wealth management being discussed. Given the significant cost of retaining a wealth advisor, it is likely that ultra-high-net worth (UHNW) and high-net-worth (HNW) clients will work with brands and advisors which operate in the more traditional manner, taking a heavily hands-on approach.

Andrew Catterall, managing director and head of digital and data transformation at J.P. Morgan International Private Bank comments that the fundamental role of private banker to play a fiduciary role for the client has not changed dramatically. However, over the years the level of sophistication and range of services that can be provided has changed substantially.  

“The relationship was, and still is, based on trust, but with access to more data, the level of trust will be improved because we can offer more transparency to clients about what drives results in both good periods and bad. This has occurred during a time when products designed to serve UHNW clients has grown exponentially—with more access to private equity markets, structured products, venture funds and hedge funds.”

Catterall furthers that technology and data science are at the core of providing a high-quality client service. Whether product or service creation, investment monitoring/simulation, understanding client needs or predicting future needs, tech and data are core to delivering against client goals and objectives. "It’s important to note that data science and AI need significant amounts of data for their models to be tailored. This currently lends itself more to the mass market than the UHNW segment, but in time we will learn which models can be applied to more complex client needs,” notes Catterall.

Tech-oriented wealth management platforms such as Wealthyhood, Pensionbee, or Wombat Invest,  frame their services around targeting a much wider retail market.

Younger advisors, like Nabarro, are also more inclined to leverage tech-based solutions to improve their offering where possible.

Nabarro explains that through the emergence of visual tools and modelling software, she is now able to paint a picture and tell a visual story to clients about the trajectory of their financial position. Cash flow modelling software for instance, allows clients to see the roadmap of their financial future forecast.

“This is a huge advantage when trying to illustrate the potential performance of long term investments, insurance policies, or pensions. As investor behaviour is one of the most telling indicators around whether a client is going to perform financially, I want to have visibility over their financial data and lifestyle data – how they’re spending – in real time. This is particularly important as clients are able to view their investment portfolios to check performance on a 24/7 basis.”

She adds that proliferation of initiatives such as open banking or open finance will be key to enabling this level of data-driven service. “If I was able to be notified, with full consent of course, when a client has overspent on a given month, I would be able to give them a call and check in to understand what’s going on in real time.”

How should data and technology be used to reshape the current state of the industry? 

Beeby agrees that real-time access to a customer’s financial data, perhaps through the use of open finance APIs which are controlled and consented to by the customer, the wealth manager can aggregate and ingest all of the user’s transactional, investment, insurance information. The advisor can then leverage machine learning tools to deliver personalised recommendations as just the starting point to their relationship. “This access is crucial to delivering a competitive and tailored service that meets the efficiency requirements of digitally native customers.”

By operating from a rich basis of recommendations built from data automatically pulled from the digital ecosystem, relationship managers are then able to elevate the depth and nature of their financial advice. This results in benefits at both ends of the client spectrum: Relationship managers are able to service a substantially higher number of lower-tier customers, scaling their service and opening a new revenue stream which would otherwise be considered too labour-intensive to justify serving. For HNW clients, the advice would be far more customised to their specific needs, and available on a more frequent basis.

When thinking about the potential of technology beyond where it is used today, Wrzesniewski is excited for the future. He believes that data and technology have the ability to go beyond just enabling traditional consumer journeys and begin creating new categories of value, and the use of data and AI to predict consumer needs and recommend next best actions adds value well beyond traditional advisor touchpoints.

“No two consumers are alike, and having the ability to observe individual preferences and behaviour allows wealth managers to engage when, where, and most importantly how the consumer prefers. Data will also allow wealth managers to learn real time about what consumers are asking and doing by breaking down the traditional walls between CRM and other internal systems of records. This will enable personalised digital experiences at scale that will resonate with consumers much more than the current “mass customisation” approach for everything from sales processes to review sessions.”

Wrzesniewski adds that it will be key for wealth management firms to invest in data cloud capabilities—either natively or through strategic partners—to realise these exciting possibilities.

More effective use of data-driven technology also holds the potential to reduce the cost of access to wealth management services, improving financial inclusion.

Unfortunately, the higher up the scale of clients’ assets under management you slide, the more human attention is granted. “There is an inverse correlation between AUM and technology adoption – the wealthier the clients, the less value their wealth managers see in the adoption of technology,” posits Beeby. This thinking will only serve to delay the inevitable by pushing the uptake of data and technology tools to the next generation of digitally-native relationship managers.

Nabarro echoes Beeby’s point, noting that high fees naturally make accessing financial advice prohibitively expensive for most retail consumers. She argues that if more innovative and efficient ways of operating are able to be achieved, firms would be able to service more clients at a lower cost.

“However, if the status quo continues, the wealthy will continue to have access to wealth management and become more wealthy as a result, exacerbating this chasm and resulting in those who aren’t in a great financial position to have even less access. We need innovation to help level this playing field, and without it the industry will collapse.

The relationship manager is here to stay, but exactly the form that the role will take into the future remains undecided. The role will naturally require a new skillset from what is required today; the relationship manager will need to be more of a tech savvy coach rather than an authoritative guardian of complexity.

Beeby concludes with a few guiding questions the industry should ask of itself: How do we get to a digital future? How can we shake things up and become more innovative? What do the next generation of wealth customers need from us - now and in the coming years?”