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Steering Wealth Management Industry through Digital Transformation in the Post Pandemic World

Technology adoption is no longer a matter of simply driving growth and product innovation, rather, it is about surviving the current crisis and even thriving under it.

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Global disruptions are hardly new in the Wealth Management Industry. The nature of the industry has always been synonymous with volatility. However, the outbreak of the COVID-19 pandemic has been an unprecedented phenomenon, not just for the Wealth Management Industry but for industries across the world. Since its onset in the first quarter of 2020, the pandemic has resulted in unpredictable shifts on a global scale that has resulted in the demise of many businesses.

Digitally Empowering the New Normal

The Wealth Management Industry has been one of the slowest in the financial services sector to embrace digital transformation. We have only 3-4 Technology vendors catering to the bulk of the Industry. There is very limited innovation on the Digital side. CEO of India’s Top 3 Wealth firms in a recent webinar said as an Industry we are not able to provide an easy to understand portfolio statement to a client. Simple databases containing email ids / mobile nos. of clients, prospects, product manufacturers, well-wishers are non-existent in most of the firms. 

The current business disruptions can be considered as a critical catalyst of digital transformation initiatives that are accelerating evolution and compelling firms to leap into the future. The Industry, in particular, has much to look forward to in the form of digital solutions that not only revolutionise operations but radically reform business models and practices. 

Analytics and Automation: Driving the Future of Wealth Management

The technological changes that lie ahead, demand that business leaders should spend considerable time on a very well thought of digital strategy to significantly enhance customer experience and operational efficiencies with priorities clearly defined, clear requirements with no ambiguity, dedicated resources for specifications / testing / implementation and training, frequent discussions with service providers, ability to find workarounds, hosting the solution in premises or on the cloud, regular monitoring of the projects and most importantly there should be tight control on costs.

What are the processes which should be done by Human Intervention and which should be automated? Which services should be done In House and which should be outsourced? A sizable part of the wealth firms’ employees is not client facing. The Industry average is 1:3 which means for every 1 Relationship Manager, the firm would employ 3 non client facing team members. Costs and Confidentiality would play a very important role in this decision making.

Key areas which the Industry needs to focus their priorities are:

·Having a 360-degree view of Client’s Portfolios across his wealth managers, highlighting key risks, key performance drivers across asset / products, comparison with benchmarks, etc

·Implement Big Data along with Predictive Capabilities and Scenario Analysis which will play the most important role in the “new normal” by offering vital insights on client portfolios. Firms need to fast-track their understanding of advanced technologies such as Machine Learning (ML) and Artificial Intelligence (AI) to drive innovations. 

·Digital onboarding of clients with Video KYC as an alternative to In-person Verification

·Providing a world class mobile app which is simple to use, provides critical information and is easy to understand. 

·Implement tools to automate manual and repetitive processes like daily updation of transactions, market data feeds, reconciliations, etc. Focus should shift to more qualitative aspects of analysing portfolios and addressing breaches and deviations. 

·Implement robust Cyber Security and Business Continuity Protocols. Do a Vulnerability Assessment and Penetration Testing every six months. Clients would get a great deal of comfort if the Wealth Firms who are custodians of their critical information are an ISO27001 certified organisation

·Ability to quickly action portfolio changes in case of any adverse news after taking into account capital gains and exit load implications. 

·Do an annual review of market data applications access given to team members. Lot of times, especially when a new solution is implemented, firms go overboard and give access to databases to lots of team members who might not need these on a regular basis. There is also a possibility where multiple databases are subscribed addressing the same or similar problems. There would definitely be potential cost savings. 

·Implement ready to use digital solutions and change internal processes instead of starting from scratch to build solutions to cater to its processes.  

·Don’t shy from exploring global solutions, you would most likely get a great product which may not be expensive. 

·Insist on following the Methodology of “Pay as you Use or Pay as you Grow” instead of incurring significant implementation charges and license fees. 

·Explore working with StartUps who are hungry for businesses and will go out of the way to build great solutions.  

·A robust database for sending relevant, targeted and personalized communications 

·Make a beginning and take baby steps. Focus on 90% of your requirements. Lot of time and energy is spent on addressing 10% of requirements which can be done manually or there could be a work around

We are at the cusp of a brave, new world that demands self-sufficiency, and it is becoming rapidly clear that greater digital freedom will play a pivotal role in making the Industry more effective, scalable and enduring on this uncharted road ahead. Firms that deploy these tools fast will attract clients and survive. 

The Industry has always been one to shy away from digital transformation. Technology adoption is no longer a matter of simply driving growth and product innovation, rather, it is about surviving the current crisis and even thriving under it. The speed and scale of this adoption is what will determine how successfully wealth firms will be in the “new normal”.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

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wealth management

Kartik Kini

The author is Chief Operating Officer, Waterfield Advisors

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