Private View Blog: Will wealth managers find the right mix between talent and technology?

The traditional model of bricks and mortar firms, competing for both clients and talent, still prevails in the private banking business. Individual employees and top-performing teams are regularly hijacked by big banks, who spend their time obsessively monitoring rivals, to lure a defecting team together with its clients.

But this model is at last being challenged as unsustainable, especially as new generations of entrepreneurs don’t necessarily share the same loyalties to their bankers as previous ones. This means the time could be ripe for a new model and observers are looking at how the relationship manager of the future will be influenced by technological innovation, not just from within the banks, but from the increasing number of technology “vendors” circling their prey.

In his forward to a new report on the wealth technology landscape from consultancy firm The Wealth Mosaic, Ian Ewart, CMO at data analysis specialists Acin, calls for an end to this traditional model, which only takes client needs into account as a “subsidiary consideration”.

“In a growing and profitable market segment that wealth management has been, it makes little sense to spend so much resource on enticing assets away from the competition,” according to Mr Ewart.

Instead, writes the former senior banker with Coutts, Barclays and HSBC, it is time to start developing home-grown talent and attract new assets through a re-engineered model, deploying a “talent and technology mix that is both differentiated and sustainable”. Client engagement and experience in this new age of technology-enabled asset and wealth management can be further enhanced by the judicious use of artificial intelligence and machine learning, runs this argument.

We have heard this story before, although maybe not as loudly or clearly as it is being broadcast today. Let’s not forget that US bank Citi started the digital transformation of its private banking division even before the global financial crisis of 2008. The notion of aggregating trades of many small custodial clients into so-called “big” data was developed by firms including the Bank of New York and State Street more than 25 years ago, although they lacked the technology to deliver comprehensive analytics and most of the financial world paid little attention.

The difference today is that we are no longer talking about strategies being cooked up in the bank’s technology “lab” or by its backroom boffins. A growing cohort of 400 technology firms is now being invited in to construct “platforms”, “solutions” and “portals”.

The dream of Stephen Wall, who runs The Wealth Mosaic, is to link up these external firms with the banks. He has worked previously for consultancies including Aite Group and Scorpio, writing reports on industry trends, but feels his moment has come with this start-up, curating a space where the two constituencies can meet and swap ideas.

Among the trends highlighted in the report are: the needs of “emerging investors”, the high net worth clients of the future, seeking digital channels of communication, inspired by the customised offers shaped by the likes of Amazon and Spotify, driven by data and algorithms; use of technology to support alternative and direct investments; adopting digitised “client lifecycle management” systems to facilitate more efficient onboarding of clients; and acquisition of and partnering with fintech firms by banks.

Central to this vision of a brave new wealth management world is a reassessment of the ownership and management of data, which in turn will lead to a new type of relationship between client and relationship manager, fostering a different mix of analogue and digital inputs, which we are yet to arrive at. This must include both the provision of financial advice and a focus on profitability.

Mr Ewart, Mr Wall and their camp followers in the high-stakes tech vendor world are keen to convince us that the answer to continued and further professionalisation of wealth management can only come through digital transformation. But they ignore the possibility that profit-seeking banks will use this as an opportunity to run down adviser numbers and take the human factor out of private banking. The danger is that managing the wealth of the people will no longer be conducted by a “people business”.

Yuri Bender is editor-in-chief of Professional Wealth Management. Follow him on Twitter  @YuriBender 

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