Differentiation and data can drive wealth management's digital reboot

Digital disruption is hitting wealth managers hard. A Fidelity report showed that managers who deploy digital technology have 40 per cent more assets under management than those who do not, so to stay relevant, digital has to be an integral part of a company’s offering.

The new generation of investors is challenging the once stable, traditional business models. Younger investors are more digitally minded and now educate themselves in investment decisions, posing a challenge for companies not keeping abreast of rapid technological advancements.

Differentiation should be a key starting point for any digital strategy – particularly when targeting high net worth individuals. US-based 1000 Angels certainly shook up the venture capitalist industry and provided a clear point of difference when it launched in 2015. As a digital first, invitation only network, it allows members to build their own portfolios from exclusive, online investment opportunities in some of the most exciting, high growth companies in the world – crucially, with no management fees. 

When it comes to empowering wealth managers to offer a differentiated advice or concierge experience, organisations should consider digital tools, which offer easy access and a tailored response. Chat apps, for example, combine Artifical Intelligence (AI) technology with experienced staff to provide an end-to-end, bespoke service. Could this be adapted for the purchase and managing of assets?

Virtual reality

Equally important to today’s investors is the ability to move seamlessly between physical and virtual worlds, on their terms, with minimal effort. This means wealth management businesses need to concentrate on harnessing digital channels which save customers valuable time. Old school personal assistants may have been replaced with virtual equivalents but a service to deal with time consuming admin tasks is still just as sought-after – albeit with a 21^st century focus on speed and convenience. Take, for example, MyWave’s AI platform Myia which disrupts old world energy price comparison sites by automatically switching users to the cheapest available tariff – could the same radical approach be taken to completing tax returns or even managing investments?

In fact, there are a number of proven tools, which could be effectively employed by the wealth management industry to help investors operate more efficiently. A one stop shop, for example, may not be a new concept but in the digital wealth space the introduction of a one tap search function - designed to pull in data from various sources - could significantly cut research time and offer an attractive end-to-end user experience. Automation could also be useful in terms of using smart algorithms to analyse data, such as investment patterns or performance, in order to guarantee customers the best return across their portfolio. 

And for those individuals keen to keep an element of human contact, consider implementing an AI-driven video chat function to provide immediate access to wealth management expertise or advice. UK start-up Babylon Health, for example, has entered the healthcare sector with its AI-powered chat bot app, which enables users to check symptoms and get advice on the most suitable course of action in minutes. Its core appeal lies in its round-the-clock availability so that it can be relied on to provide advice at time of need. So apply this thinking to the wealth space and the perceived customer value of having access to expertise in the event of a family death or financial crisis, and the benefits are clear.

Data crunching

At the heart of digital activity is the collection, monitoring and analysis of rich data which is arguably a company’s most valuable asset. Brands are now expected to use the wealth of information at their disposal to offer more accurate, holistic and even pre-emptive insights to customers.

IBM’s Watson Trend shopping app is a strong case in point. By analysing millions of online conversations across social media, blogs, comments and reviews, Watson interprets this information into a useful gift guide, accessed via a free mobile app. Users receive daily feeds about popular products as well as forecasts for upcoming trends. The challenge for wealth management firms is to correctly identify the insights high net worth individuals would find useful and want to engage with on a day to day basis. Implemented correctly, this could become a relied upon, credible source of information and help build a sustained relationship with switched on investors.

Taking this approach a step further, digital tools can even help financial firms build a personal relationship by demonstrating an understanding of each individual’s aims and aspirations. The explosion of personal fitness, weight loss and coaching apps shows how effectively technology has become integral to lifestyle choices – where they are relied on to deliver a personalised plan and report on progress. Could asset and investment insights be tailored around an individual’s goals in the same way? 

Perhaps most exciting is the ability to use data to predict customer’s needs in advance.  Online bank Atom says its brand will be ‘telepathic’ in its prediction of customer needs; offering solutions to problems before they are even considered.  The challenger bank turns traditional banking processes on their head and aims to keeps customers ahead of the game. So rather than receiving last month’s statement, Atom customers are sent the one for the month ahead.

Using data in this way to create a personal profile for each customer could also allow forward thinking wealth management firms to offer bespoke investment options and scenario planning – adding customer value and creating a point of difference in the marketplace.  The challenge here is to ensure that the right information is collected to provide an accurate and reliable service.

The wealth management sector is advancing faster than ever before and it is important to recognise and embrace the opportunities digital technology offers. With the emergence of new entrants to the sector, and with a new generation of investors poised to embark on their investment ventures, it is important for larger and more established wealth management businesses to embrace technological innovations to stay ahead in this competitive marketplace.

Peter Sayburn is CEO and co-founder of proposition design consultancy Market Gravity