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Boris Rankov, InvestCloud

Client segments have been re-shaped—and advisers need to adapt


Dr Boris Rankov, Head of Digital Advisory at InvestCloud, writes that the pandemic has significantly re-shaped client expectations in wealth management, and advisers need to adapt to this new environment to ensure future success.  

Dr Boris Rankov, Head of Digital Advisory at InvestCloud, writes that the pandemic has significantly re-shaped client expectations in wealth management, and advisers need to adapt to this new environment to ensure future success.  

The pandemic has been a challenging time for wealth management. While the industry continues to evolve at pace, wealth managers can look to other industries for guidance. Take Netflix for example, this platform recommends endless content for every user, personalised to their viewing history likes and dislikes. Using this same thinking, the possibilities for advisers are endless. 

The turbulence and uncertainty of financial markets has seen many wealth firms experience an uplift in AUM, with advisers getting closer to clients and becoming the primary touchpoint of their financial lives. But with this, there also needs to be a recognition that—along with society at large—wealth clients have fundamentally changed.
There is an opportunity now for wealth managers to get ahead of the game by understanding these new client segments and create better, more efficient services that can pre-empt needs, and even open new business lines. 

Central to this is harnessing the right technology. 

‘Early adopter’ digital investors have shifted the focus of their portfolios to growth as a result of the pandemic. Entrepreneurs are creating wealth at a faster rate than any time before and the influx of intergenerational wealth has placed an added burden on wealth managers – to get up to speed fast. ESG and impact investing are also driving decision making. It is clear advisers must keep up with the changing needs of their clients, and without the help of technology this is a mammoth task. 

In the past year, a new investor segment has emerged – the Gen Z investor. These new investors expect their adviser to be tech savvy, while offering advice that fits with their values, morals and financial goals. To address this, advisers can utilize wealth management tools and analytics to quickly understand their client to ensure they are delivering the best advice possible. 

Client profiles and expectations have changed dramatically. Given that improving the client experience is still one of the top goals of a wealth manager, advisers must embrace technology to develop more granular insight for their clients. This is vital in enabling them to talk to each client on a deeply personalised level – both digitally and in-person. 

Insight is key for the future prosperity of wealth management businesses in dealing with these new client segments. 

Clients today expect every service provider they engage with—from entertainment to banking—to know them and their needs intimately. It follows that they would expect the same of their wealth managers, too. 

Look at Netflix. Its algorithms are capable of not just showing users the latest and greatest it has to offer but making recommendations based on each user’s history too. This creates a relationship whereby the user can trust Netflix to make their entertainment selection for them, without having to decide too much themselves. 

Wealth managers can go further than digital-only platforms. Customers have the added benefit of a client adviser who they can physically see, speak to, and seek advice from. This is an incredibly powerful tool. 

There are two core technologies that are needed to automate and action insights: artificial intelligence (AI) and a digital warehouse. 

A digital warehouse is a powerful data management tool. It not only centralises all business and client information into one place but adds in financial data and alternative data to create a truly holistic platform for running a wealth management business digitally. 

The aggregation of data from multiple systems and custodians, external news and social media sources, alongside market and portfolio data, provides managers with a single version of the integrated truth when it comes to their data. It means that all content a client interacts with can be recorded for use later on, allowing them to deeply understand clients.  

But this needs to be actioned. Manually, this would be very time and labour intensive, keeping advisers away from adding value in other necessary ways. So, instead, we look to automation technologies. 

AI optimises client engagement at scale. When harnessed alongside the knowledge a client adviser has of their client, AI can be used to precisely define the next best action to take on their portfolio. 

AI does this by making recommendations that match those of the house view—i.e., those made by the Chief Investment Officer—to the right clients. This itself would be based on analysis of current products and stocks within a client’s portfolio, past transactions and click behaviour within the client portal, alongside a manager’s own understanding. 

This approach helps to drive further efficiency while creating greater value in client interactions and investment decision-making. It makes an adviser look good in the client’s eye, while delivering greater value and creating trust. Moreover, this is completely scalable across all client segments.

The combination of a digital warehouse and effective AI means your clients will love you more, and advisers can serve more of them, because the relationship can be automated to a greater degree. This means new services and demographics can be looked at—creating further growth. 

For low AUM clients, the client experience can be tailored to service a proportion of the relationship through automation. Now giving an opportunity to open whole new business lines. 

Via AI and data, wealth firms can look to open these new business lines, creating almost completely automated experiences for those with lower AUM to be able to serve them profitably, then expanding to human-based advice as these clients mature and grow assets. 

Wealth firms can encourage such journeys by adopting Gaming Theory, behavioural science and Decision Theory disciplines into their digital offerings. 

Gaming Theory encourages use via elements such as the appointment dynamic to encourage clients to undertake certain actions. These can be push notifications to create a sense of urgency or creating communities of clients to encourage peer-to-peer interaction on your platform. Decision Theory encourages clients to take certain actions on their portfolio, in line with your recommendations, helping them to grow their assets quicker.  

Both these disciplines have the ability to create true personalisation with a mass affluent or retail client. This allows the firm to effectively serve without compromising service and encourage them to grow assets to become a fully-fledged client. 

The pandemic has fundamentally altered many things in our lives. For wealth management clients, it has created a shift in the way they want to be served.

Wealth advisers have an opportunity ahead of them if they can take advantage of this. Adopting AI and effective data management can ease the burden advisers face, automating many parts of the relationship without compromising service, allowing advisers to focus on the value add. 

Crucially, these technologies also mean growth. Client service automation opens new possibilities when it comes to serving new demographics—future proofing the business into the long-term. 

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