Atrophy is for losers

A pandemic, falling markets and demographic shifts have underlined that wealth managers need to hedge against business shrinkage by adopting consumer-centric Open Data solutions.

In EY’s 2021 Global Wealth Management Report, the research found that “…half of clients believe wealth managers understand their goals, 41% feel their provider could understand those goals better and 5% think firms don’t understand them at all”.  This pointed to a fundamental gap in the relationship with customers and the report concluded that:

“Wealth managers should place a deep understanding of clients’ purpose and beliefs at the heart of their proposition, helping to deliver tailored and meaningful services and experiences that create long-term value for clients, staff and firms alike”.

Keeping close to clients has been particularly challenging through the pandemic and recent market turbulence has started to impact client portfolios. However, the traditional high-touch, in-person relationship management model was already in declining demand pre-pandemic, as investors preferred hybrid solutions, especially an on-demand digital service and more engagement in investment choices.

Evidence has emerged showing a positive relationship between a well-delivered digital proposition and overall client satisfaction. The more satisfied the client is, then the greater the likelihood to hold more investable assets with their wealth management firm. As a recent FactSet/Aon study reported:

“A digital mindset is therefore no longer a “nice to have” but a genuine differentiator—and revenue generator for firms... Firms that [developed] a strong digital experience and innovative tools have since reaped the rewards with elevated engagement and higher client satisfaction scores”.

Digital capability

In the FactSet research, the importance of doing this in a convenient way was paramount, with one critical advantage of digital wealth management being to enable a better use of their time. Investors who give wealth managers top marks for their digital capabilities, tended to feel far more confident about their financial futures than their counterparts (48% vs. 26%), which translated into higher revenues.

The correlation between digital capability and wealth business results is well established. As far back as 2016, research was showing that success in wealth management depended upon customer centricity and digital adoption and that “To become a front-runner in wealth management, digital initiatives have to be a core component of a wealth management firm’s culture and vision”.

Customer wants

So what exactly does the winning digital experience deliver? In our work with HNW, mass affluent and workplace audiences, the fundamental requirements from end-customers are remarkably consistent – make it easy for me to see what I have;

tell me how I’m doing and show me how I can improve my outcomes.

As the pandemic saw a spike in interest in direct equity dealing, ETFs and crypto-trading, investment platforms and wealth managers were exposed to not only technical deficiencies from underinvestment in IT but also in proposition gaps.

While during 2020 Open Banking was slowly being seen as a means of improving the onboarding of new clients, making fact finds and KYC checks simpler, wealth managers had not fully capitalised on the potential to deepen customer relationships through Open Finance.

Open Finance encompasses not just payment accounts but the full range of assets such as savings, investments, property and liabilities that complete both a cash flow and a net worth statement view of their customers’ wealth.  The value exchange for clients is holistic, real-time, up-to-date information shared with an adviser that has the insight and understanding that builds trust and confidence.

The ability to aggregate data, categorise and forecast, with a set of personalised nudges and tailored content, provides the rich customer experience that has been missing.

Atrophy is not a prize

Without a holistic Open Finance capability, the prospect for advisers is one of a diminishing return and a business in terminal decline.  A study by McKinsey showed that whilst advisers had achieved high client retention rates through the pandemic, they were failing to add new and younger clients. Without the ability to address intergenerational wealth transfer and to retain assets as a result, by not having the right customer engagement.  As McKinsey noted:

“…being the primary financial advisor to a household as more and more clients exhibit a preference for consolidating assets with fewer providers. The role that an advisor plays in the financial lives of clients can help determine if they will be net winners or losers with more consolidation and more money in motion”.

Moneyhub’s mobile first Open Finance solution is specifically built to meet that challenge.  Account information and personalised data insights – coupled to instant payments and sweeping – delivers the experience clients want and that advisers need to thrive and survive.

Find out more about the IMpower Incorporating FundForum 2022 event and agenda here >>