Will Trout, Head of Wealth Management at Celent, speaks on how how wealth managers should understand what their technology requirements are after the pandemic is over.
The COVID-19 pandemic will prove transformative for wealth managers, above all for those with high-touch, personalized service models. The abrupt shift to remote work has sparked unprecedented inventiveness amongst firms large and small. One example is the use of virtual communications tools for satisfying regulatory exams and audits.
The pandemic also has spurred an acceleration of the digital learning curve across the broader enterprise. Years have been compressed into months, as staff from the CEO down has been forced to move online. This process will be difficult to unwind and heralds a massive boost in productivity, one around which wealth managers must capitalise.
The Backdrop
This March, wealth manager attention turned from profit and earnings to survival in the face of the pandemic. Employee productivity and staffing posed an immediate challenge, with client communications needs also urgent.
Advisors and contact centers saw unprecedented call volume; inquiries to custodians from advisors jumped by 50%. Digital advice and self-directed platforms saw a spike in activity as investors tried to catch the dip in the market. App-based broker Robin Hood briefly crashed in the face of demand for FAANG and other supposedly COVID-proof stocks.
Wealth Managers Respond
To keep business running, firms large and small turned to collaboration tools like Slack and Microsoft Teams, a trend mirrored in society at large. Within weeks, use of Zoom had surged from 10 million daily users to more than 300 million worldwide.
Use of these SaaS-based tools has put massive demands on both hardware (“VPN overload”) and firm networks. To manage systems risk, and support last mile connectivity to advisor homes, wealth managers must deepen investment in bandwidth and technology generally.
Secured connectivity in the form of SD-WAN; unified communications tools such as in app video; and investment in employee performance measurement tools are critical steps. The Cloud will be a powerful enabler: moving from on-premise to hosted storage solutions means data from files and other information sources can be automatically updated across systems.
Cost management
Looking ahead, firms must also closely manage IT spend. Solution extensibility and feature set are not everything. Responsible vendor management today implies the revisiting of user licenses, data consumption and software maintenance agreements, as well as the consolidation of existing relationships.
Outsourcing
Outsourcing offers a way forward. While outsourcing retains a connotation of labor arbitrage, e.g., call centers in India, the reality today is more complex. For starters, operations can be outsourced down the street (in the case of an internal servicing center) or across the world. Wealth managers are increasingly looking to “nearshoring”, whereby outsourced activities are managed within a similar or identical time zone. Access to an educated and frequently English-speaking workforce is part of the appeal, particularly to support middle and back-office functions such as regulatory reporting.
Vendors can also take on customer-facing functions such as contact centers requiring pipeline management, filtering/routing and analytics capabilities that a wealth manager may not have. Delegation of these functions can also support the continued downsizing of the financial institution footprint post -pandemic, a trend unlikely to be reversed.
Nationwide Insurance announced in May that 4,000 employees across 6 regional hubs would remain offsite permanently, for example. Rationalization of physical office presence should be reinforced by the upskilling of talent through selective hiring and the use of natural language processing for advisor and agent support.
Empowering the Advisor
Topline growth will become more essential as firms shift from crisis mode. Lead generation, content marketing and social media management tools also will be critical for client outreach as the golf course, the Rotary Club and other traditional networking hubs become less popular and/or harder to access. Digital events, such as virtual seminars focusing on topical areas such as estate planning, should be part of every firm marketing arsenal.
The human touch also matters. In a remote working environment, advisors will need to work extra hard to demonstrate empathy to clients and prospects. Satisfying clients’ emotional hunger—for education and personal connection—will move to the front of the wealth manager proposition, with performance returns and hygiene factors such as reporting increasingly table stakes.
The Road Ahead
One challenge for wealth managers is that technology deployment cycles will be greatly reduced post-pandemic, particularly as bandwidth from 5G networks enables the deployment of wearable technologies and other superlight personal communications devices.
The good news is that clients too are experimenting with technology as they adjust to the new work order. Expectations for digital adoption will be moderate, all the more for traditional wealth managers, who can leverage a built-in reservoir of trust to surprise and delight their clients.