Key trends in wealth management

There are a number of big-picture trends that are acting as catalysts for firms in the wealth management space and as a focus for their investments in technology.

Clients of wealth-management firms are increasingly diverse and astute; they are often income-rich but time-poor, according to Seán Ó Murchú, director of wealth advice and distribution at Bank of Ireland.

“They have evolving expectations about how their service providers should interact with them and technology is at the core of these interactions. They are comfortable using digital tools for their daily banking, shopping and engagement with service provided from their electricity supplier, mobile phone provider and media apps. Wealth-management firms are responding to changing client expectations by introducing new innovative technology solutions to meet clients’ changing needs,” he says.

There are three main areas where new technology tools are impacting wealth management: communication; financial planning and advice; and processing efficiencies and cost-reduction.

“Wealth-management firms are using technology to segment their clients in multiple ways, no longer based on location, age or assets under management. Using customer insights enables more specific, bespoke and timely targeting of information and messages to the appropriate customers through their preferred communication channel. Intelligent software enables new ways to engage, inform and disturb clients with data-driven insights and ‘calls to action’. The ability to provide personalised offers and rewards helps build brand loyalty,” Ó Murchú says.

Although digital platforms and robo-advice were expected to take the place of the wealth adviser, the reality is somewhat different, he says.

“Many clients like to do their own research and analysis and want to then be able to move to a seamless, frictionless transaction process. But for many clients, there remains a desire to talk to or meet an adviser to discuss options before making important financial decisions.

“Customers will decide when and how they want to engage with their wealth manager, and will start the journey in one channel and hop on and off the channel as they proceed through the advice journey. Building advice platforms that provide this flexibility, that are truly ‘omni-channel’ will differentiate the winners in this space,” he says.

Chatbots

But Ger Perdisatt, enterprise director at Microsoft Ireland, says preferences for chatbots are growing and that voice and biometric technology is already impacting the banking industry. Multiple globally systemic financial institutions (G-SFIs) are successfully trialling different solution products to improve the customer experience and reduce risk and fraud threat, he says.

“The frictionless customer experience has already been highlighted, and chatbots meet customer expectations of an immediate interaction with a bank when they want, wherever they are. And preferences for chatbots are growing – 59 per cent of US millennials and 60 per cent of Gen Xers have used chatbots. At the same time, voice recognition provides a secure, reliable way to verify the identity of customers, reducing the ever present threat of fraud and identity,” Perdisatt says.

A lack of personalisation has weakened client relationships, he adds.

“To succeed in the new financial services landscape, banks must adopt an intelligent, personalised customer experience. This is where AI comes in. The evidence shows that leading banks are already catching on, with many investing in the customer experience as a top priority. For those that have, the results have been powerful – a 20 per cent increase in new sales and 20 times better response rate to pitches using machine-learning technology to predict what customers need next and to determine the right channel to reach them.

“AI and machine learning is also being increasingly used as part of effective risk management within wealth management and capital markets environments. Banks are under increasing regulatory burden, with tight deadlines, and internal costs are growing. Many customers are now looking at how leveraging cloud and AI allows them to provide infinitely scalable compute at low cost; get more transparent audit trails; accelerate development of strategic risk platforms – using third-party products and in-house capabilities that can be monetised externally – and provide a better future-proofed system of maintenance/resilience,” Perdisatt says.

‘Advice as a service’

At present, advice around investments in the Irish market is normally transacted on the adviser’s terms as opposed to the customer’s and for customers it tends to feel product-focused and transactional by nature, Ó Murchú says.

“Customers are now seeking advice as a service – they expect their adviser to have a better understanding of their needs and to fulfil any transactions in a seamless and pain-free way.”

Bank of Ireland is currently in the initial stages of partnership with a number of proven fintechs to develop digital solutions for customers’ broader advice needs.

“There is a real opportunity to enhance our customer experience around holistic advice by creating a single advice platform across all channels, mainstream, premier customers and high-net-worth, which will have a transformational impact on the Irish market,” Ó Murchú says.

Blockchain technology and its associated value is another trend that is going to have a profound impact on business.

“By 2025, the business value added by blockchain will grow to slightly over $176 billion, then surge to exceed $3.1 trillion by 2030. The rapidly growing number of distributed ledger technologies that address banking and capital markets concerns are already percolating throughout the industry, with a dramatic transformation on the horizon,” Perdisatt says.

“Blockchain technology is not just about security; it is about the customer experience. Banks are embracing blockchain because digital ledger technology enables banks to mathematically guarantee transactions so that they always know they are authentic and impervious to fraud. In short, banks know with certainty the actual dollar amount in any given account at any given time. And while this is a value proposition in and of itself, the real value for banks is being able to give their customers assurance that their transactions are secure and encrypted. This helps strengthen the bank-customer relationship – not to mention the financial security on a macro scale,” he adds.

Ultimately, the seamless interaction between technology solutions, advisers and their customers is the key to a quality customer experience.

“To enable the integration of digital advice with traditional advice, a single advice platform that goes across all delivery channels is the key to meeting the customers’ demands for advice in the manner they want,” Ó Murchú says.