Article: Closing the Digital Readiness Gap
You may have seen our article by Sean Raine, VP at IPBS on how to deal with change in the wealth management industry.
In an industry where there is a continual downwards pressure on fees and asset flows, the impact of shifting demographics and technology expectations are driving a step change in the user experience demanded by customers. Wealth managers need to respond accordingly by reshaping products and services and investing in transformational technologies.
One of the biggest changes in our industry is that the so called millennial generation are increasingly turning to digital channels to perform their bank activities and shunning traditional branch based or call centre banking.
Two worrying facts for wealth managers; the consumer's smartphone will become the main banking channel and third party financial aggregators have the potential to know more about your customer's financial position than any human advisor.
Against this backdrop of seismic changes some wealth managers have had their head in the sand. A 2016 PWC survey indicated that only a quarter of wealth managers offer digital channels beyond email capabilities. Another survey this time from Ernst and Young showed that digital channels and self service capabilities were the top rated factor for client service experience (see diagram below).
(Source: Ernst & Young - Global Wealth Management Survey 2016 - The experience factor)
It is clear that firms that do not respond to change simply won't survive in the medium to long term. Why? Research shows that 85% of High Net Worth Individuals (HNWI) use 3 or more digital services in their day to day lives. More than two thirds of HNWI use online or mobile banking and more than 40% use online channels to review portfolio or investment markets. These people want and demand that same consumer experience they get from Amazon, Uber and Apple in other areas of their lives, and banking is no different.
Digital readiness gap
The upshot of this digital readiness gap is that the sector is vulnerable to a digital disruptor, one that uses innovation to address current HNWI needs in a convenient and user friendly manner, including the use of robo advisers to efficiently service customers and deliver what they want, how they want it and when they want it.
If any of the above sounds familiar then it is time to take action now.
Digital has become a key accelerator for evolution and institutions must redouble their efforts to build a future ready digital infrastructure that provides a unified customer experience. Digital should not be feared. It has the power to enable you to deliver existing and new services in a way that is efficient and cost effective.
But how can slow moving and risk-averse wealth managers make the necessary changes if they lack the digital skills required? One option is to look at strategically partnering with a FinTech innovator/disruptor. They will bring the speed of development and access to new capabilities the market is looking for.
According to Mckinsey, "digital has the potential to generate significant cost reductions through robotics and automation, change business models with digitally assisted advice, and drive disproportionate market-share gains through digital acquisition and servicing of clients."
It is likely that the institutions that benefit most will be those that embrace the opportunity to close the digital readiness gap. Of those institutions that are already digitally enabled, they need to continue to build on these offerings. These institutions will be in a position to better compete in the market by combining the best of technology and human service and are likely to remain relevant if not thrive in the future.
You can read the full version of this article which first appeared on Bobsguide here.