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Digital transformation

The urgent need for digitalization in Wealth Management

Prioritize investment in digital tools for greater profitability and client engagement.

To boost efficiency and revenues during current challenging times, wealth management firms must enhance their digital technology platforms and tools.

In brief

  • Throughout 2022, the global economy experienced a steeper-than-expected slowdown; as a result, the wealth management industry faces a daunting array of new challenges.
  • To help build future growth, wealth management (WM) firms need to make disciplined investments in the digital transformation of the wealth management value chain to streamline processes for critical tasks and to provide enhanced customer experience.
  • Having the right digital tools can help boost relationship manager (RM) productivity and effectiveness, as well as improve client experience and loyalty.

Careful cost management and prudent investments in new technologies and automation will be required to enable and sustain long-term growth in the wealth management industry.

High-net-worth individual wealth and population decline highest in a decade

These are tricky times for the wealth management industry. Difficult macroeconomic conditions led to bearish global markets and significant stock market declines across regions. Following suit, high-net-worth individual (HNWI) wealth and population totals dropped by 3.6% and 3.3%, respectively, as compared to the prior year.

WM revenues have taken a hit due to the decreasing value of assets under management and HNWI client loyalty challenges, but the cost base for the business remains high – negatively impacting profitability. Not surprisingly, cost reduction and revenue enhancement have become top priorities for WM firms; but they also need to devise new business strategies and approaches to meet current and future growth goals.

Let’s look at what WM firms need focus on to gain greater traction across the industry – expanding digitization of the business, and thereby empowering RMs to better capture and profitably serve clients, as well as ensuring customers are offered a better experience.

Digital transformation can improve efficiency and the customer experience

Across the wealth management industry, manual processes continue to be commonplace and have a significant impact on efficiency, accuracy, and the customer experience:

  • One in three surveyed executives said that critical tasks are still carried out manually, resulting in poor efficiency of staff, and also increasing the risk of manual errors.
  • Only a third of WM executives ranked their firm’s end-to-end digital maturity as high, and 76% agree that improving CX is vital.

Cloud migration, cloud-native applications, leveraging AI, automation of manual tasks, and launching of external APIs can help firms significantly improve customer offerings and customer experience, while bringing down their cost base and improving accuracy.

Two real-world examples of how digital transformation can deliver positive impact on wealth management services delivery follow.

1. Digital service offering expansion for private asset investments

BNP Paribas Wealth Management launched the Private Assets Portal, a digital solution dedicated to investments in private assets – including private equity, real estate, and infrastructure. The digital platform offers clients real-time access to all information regarding their investments in private asset funds to which they subscribed via electronic signature, including a 360° view of portfolios with detailed geographies, strategies, or currencies. The platform also provides detailed reporting on performance – at the fund level and for their consolidated portfolio. Clients receive automatic notifications when new information about their investments is published; the portal also offers access to dedicated content on these asset classes, including articles, expert videos, and more.

2. Digital make-over for private banking services in Asia

A suite of digital tools has been rolled out to global private banking clients at HSBC in its Asia-Pacific region, with the goal of facilitating both the personal advice from RMs and convenience that client want via digital touch points and capabilities. Digital tools include:

  • RM-client communication via instant messaging
  • E-signature capabilities to facilitate the client onboarding process
  • Access to online trading platform for equities, ETFs, and FX, including trade instructions to RMs through chat
  • Online, real-time access and asset transfer capability for bank accounts across the institution.

WM firms should also explore and implement best-of-breed platform solutions as part of their IT ecosystem. These can help firms increase their straight through processing (STP) rates, lower their overall IT and operations costs, and reduce the time to market when launching new products and services.

Further, such systems can help significantly enhance advisor efficacy. Newer tools in areas such as CRM can empower advisors to dedicate more time to revenue-generating client activities, such as offering advice and value-added services, and much less time on mundane administrative and non-core activities. And investments in better use of data and AI can also help advisors to better analyze and optimize client portfolios, generate greater alpha in returns as well as improving the overall client experience.

Consider the following example of a recent bank CRM project that generated substantial positive outcomes.

Leveraging data and AI for faster time to value across client relationships

RBC Wealth Management is using Salesforce to drive cost savings and efficiency across multiple areas of its business, while improving on meeting client and advisor expectations for superior service delivery and experiences. Client data spread across some 26 different systems was consolidated into a single, trusted CRM yielding significant benefits, including:

  •  Reducing data maintenance costs by 50% 
  • Streamlining the onboarding process from 30-plus signatures and an average of 200-300 pages per client, to signing packets with just one digital click – reducing new client onboarding time from weeks to an average of just 24 minutes
  • Increasing efficiency by automating routine manual tasks including meeting scheduling and client reminders
  • Delivering AI-powered insights on employee and branch performance by portfolio value, revenue, and active campaigns.

In conclusion

Economic indicators predict that investment challenges will continue through the months ahead: interest rates are expected to remain high, recession is expected in several mature markets, and it seems unlikely that current geopolitical challenges will go away anytime soon. HNWI expectations throughout 2023 will likely be more demanding, complex, and diverse, making client loyalty ever more difficult to maintain. And with sluggish AUM growth and increasing industry competition, WM profit margins will continue to be under extreme pressure.

In response, WM firms need to embrace digital transformation across the entire value chain for competitive advantage. Don’t delay: the time is now to invest in digital tools and platforms to help drive efficiencies, cut costs, improve investment performance, and solidify client engagement and loyalty.

Get ready and act on this business imperative today – superior client experience and future revenue growth depend on it.

Meet our experts

Anuj Agarwal

Director, Global Banking Industry
I bring value to our clients by helping them understand the rapidly changing financial services landscape, and advise on emerging trends, technologies, and markets. I leverage my domain and industry knowledge to support them in developing strategies that can address their business objectives.