Client experience will be the new battleground as wealth management firms face significant revenue and margin pressures in the coming year, states the latest CapGemini survey, with competition intensifying for large financial services firms as they learn to live with the rise of new digital players.
Philippa Aylmer writes that client experience will be the new battleground as wealth management firms face significant revenue and margin pressures in the coming year, quoting the latest CapGemini survey, with competition intensifying for large financial services firms as they learn to live with the rise of new digital players.
The CapGemini Wealth Management Top Trends report for 2022 which assesses the drivers, opportunities and risks for the year ahead, states that investment in human-centred design and cybersecurity will be critical to building a superior digital client experience. Adding empathy to the design process will be crucial states the report and will help WM firms consider client needs, context, behaviours when developing products and services.
Earlier this year, a CapGemini survey revealed low satisfaction with existing processes and interfaces: 51 per cent of HNWIs and wealth managers were not satisfied with their firm’s options regarding wealth manager or client communication channel choices. And 52 per cent of HNWIs did not find products and investment options easy to understand. Interesting too that 47 per cent of wealth managers agreed.
Human-centred design involves sentiment analysis of clients as well as understanding their needs, bringing empathy into product design and innovation. Essentially a combination of mindset, behaviour and tools states the report. Firms are exploring various client-centric offerings such as personalised updates, smooth onboarding and keeping investors well informed about proprietary products and services before a buy decision is made.
At the same time, cyber-crime in the wealth management industry is escalating: in 2021, cyber-crime damages stood at around USD6 trillion, double that of 2015 and costs could jump to USD10.5 trillion annually by 2025 according to Cyber Security Ventures. Email breaches, impersonation through voice phishing or even lack of employee training are all potential cybersecurity threats. And with hackers going after small to mid-size organisations investment in fraud-proof infrastructure is critical. Added to this, access to new data sources, legacy infrastructure and even migration to the cloud all increase a firm’s vulnerability.
With the wealth management industry making massive financial transactions and collecting vast amounts of client data, the report recommends that wealth management firms must encourage an organisation-wide security-centric culture and that firms should leverage advanced encryption technology. At its heart should be a focus on implementing zero trust architecture, ie using the ‘never trust and always verify’ principles. Yet all while retaining the human touch.
There are still plenty of opportunities, however. The report finds that collaboration opportunities are up as firms are exploring new growth and profitability avenues such as consolidating business units and partnering with other firms for strategic advantage, both for the great wealth transfer and preparing for investor demand for hybrid advice and digital assets.
Wealth management firms are leveraging hybrid advisory models to better serve existing clients and tap into the growing mass affluent segment profitably. Firms are also exploring fintech partnerships to ramp up their hybrid advice capabilities. For example, M&G Wealth is collaborating with Ignition Advice to build a hybrid advice service. There has also been a resurgence of family offices.
Firms will need capabilities to cater to new-age clients and deliver new-age services says the report. “Expect fintech innovations to continue wealth management industry disruption while future-focused wealth management firms will continue to explore ecosystem collaboration to boost capabilities, expand reach and cut costs.”