Private Wealth Management- Part 2

The wealth management industry is in the midst of a monumental shift due to changing demographics, the influx of new generation potential investors, transitional global scenarios, and most importantly the rampant digitalization. This pace of change has been long predicted but the pandemic has accelerated its adoption, providing continuous opportunities as well as posing new challenges for the wealth managers to sustain, grow, and strive in the market.

Digitisation in Wealth Management Value Chain

The factors backing the criticality of the digital transformation lie the most persistent and influencing one which is – the changing dynamics of the potential investors. As per a study by Roubini ThoughtLab, almost 50% of the investors are ready to shift if their expectations are not met. The ground is shifting with the wealth-getting passed on from baby boomers to Gen-X and millennials. Also, gender is changing with more women investors acquiring responsibility for wealth management, both by inheritance and their acquisition.

Even banking leaders like CITI Bank has been vocal about the urgency of digitalizing the wealth management infrastructure to survive and thrive in the coming years and the bold statement by Rodolfo Castilla, Global Head of Wealth Management Products and Platforms, reinstates that digitalization is the future.

 “We’re very urgent. We know that if we don’t get there first, we’ll be the ones disrupted and killed.”

This is enough testament to realizing that the only way to move ahead and climb the ladder up for the wealth managers is to go digital and have a smart way to go about it.

The digitisation of the wealth management value chain can create value at the following places directly:

Improving customer prospecting through AI / ML

Digitalization through AI/ML can help wealth managers identify the right prospects and drive customer acquisitions through data-led personalized marketing. With the capability to consolidate data from different sources, it can effectively classify customer segments based on multiple parameters, identify prospects through real-time data signals from social media, and dynamically generate personalized content for prospective customers, thereby improving customer acquisition.

Generating alpha through data analytics and management

Wealth managers require reliable and real-time data to evaluate investor sentiments and key market metrics and generate insights for making swift decisions for their investors. Data can enable timely, relevant, and actionable insights to develop new (and improve existing) products and service propositions, optimize channel management, drive alpha through informed portfolio choices for the investor, increase investor engagement, and improve retention.

A quanta mental investment approach leveraging sentimental analysis, alternative data, and return analytics can enable wealth managers to make informed choices and necessary portfolio adjustments. It is estimated that 60% of the wealth managers³ have developed their advisory and client analytics capabilities and are at varying stages of development and data building. At present, wealth managers have most of their data locked in product silos and legacy systems. The consensus is to have access to clean and detailed data before applying advanced analytics. Wealth management firms require a client-centric and accurate master data infrastructure that consolidates data across the value chain. Wealth manager stands better chance to generate higher alpha by increasing their investment in data management and analytics as part of their digitalization initiatives.

Adoption of Cloud Architecture to enhance scalability and operational efficiency

The Information Technology (IT) landscape within wealth management firms consists of legacy systems that maintain a high volume of financial data, which requires increasing maintenance efforts and costs. As automation and AI/ML become more ingrained into wealth investment services, an explosion of financial data will drive automation processes and solutions. To handle the growing data influx at scale, cloud infrastructure can provide a more robust alternative to in-house legacy systems, while also delivering better operational efficiency and improved agility/time-to-market.

Wealth management firms can rationalize their existing application portfolio for cloud adoption by identifying the migration’s decision paths, which will drive the cloud migration strategy through the assessment, design, build, and migration stages.

Driving speed and cost efficiency through automation

Digital process automation (DPA) is the cornerstone of any digitalization journey due to its ability to provide delivery speed, process transparency, and operational efficiency. DPA can be broadly viewed as two streams: RPA (robotic process automation) and BPA (business process automation). RPA brings in accuracy and efficiency in the execution of repetitive tasks, reducing execution time and costs. BPA, on the other hand, includes more transparent automation of workflow-based business process activities. From a value chain perspective, wealth management activities can be segregated into front-office, middle-office, and back-office divisions. The below table outlines how RPA and BPA can be effective for the relevant categories

Enhancing investor management & advisory services

Providing an enriched investor as well as advisory experience is pivotal to the wealth management industry. In addition to the human touch, digital personalization appeals very strongly to new-age investors. AI and data-enabled marketing can create personalized content for prospective investors leading to improved client acquisition for wealth managers. A transformed digital experience can drive customer engagement, thereby achieving a higher degree of customer retention and empowered advisors. A few touchpoints can be as follows:

Digital onboarding

Optimizes onboarding time and assimilates new customers seamlessly. In the face of the current pandemic, this capability of digital onboarding from remote and offshore locations has become critical for customer acquisition and retention.

Omnichannel engagement and collaboration experience

Extends “zero-touch” service by using a customized solution built on video conferencing, on-demand virtual meet (with human advisor), and bot-enabled self-service. Portfolio review and portfolio building can be performed over user-friendly virtual solutions accessible over multiple channels. Since the onset of the pandemic, video chat and self-help tools have been the most favoured modes of communication and customer support.

Data-empowered customized Robo-advisory solutions

Includes chatbots and avatars that create a personalized and smoother investor experience, thereby promoting customer retention, upselling, and cross-selling. Many hi-tech firms are providing AI/ML-powered offerings to query investor portfolios and their holdings and provide data analytics on the performance of the securities in their portfolio.

Advisor cockpit mobile apps

Enables wealth advisors to organize their activities and handle customer interactions. These apps can include functionalities like advisor dashboards and 360-degree visualizations of customers and their risk appetites.

The above-mentioned examples are only a few of the many changes that digitisation can bring about in wealth management. The digitisation shake-up in the wealth management industry can also be explained by the below image. Digitisation has changed the bucketing of few activities from the middle office to the back-office like portfolio and risk management.

Problems faced by Wealth Managers in Digital Wealth Management

Customer relationship management is traditional in the wealth management space

Wealth management has been traditionally based on high-touch interactions and personal relationships. Therefore, wealth managers are struggling to find the right balance of digital and manual touchpoints. Most wealth managers today still see information technology as a support function rather than a core business strategy. 

Low digital penetration levels across the industry are in stark contrast to the new-age clients’ digital preferences. The widening generational gap makes it harder for traditional wealth managers to understand and adjust to the younger, digital-centric clients’ needs and preferences, thereby weakening investor advisor relationships. Traditional wealth managers have been slow in transitioning to enhanced digitalization.

The pandemic and recent market disruptions have accelerated adoption, but this long-tailed gap will take longer to fill in. The digital empowerment of wealth managers should be the top priority for leadership at wealth management firms. They can start by driving programs and training for enhancing tech and digital literacy. Building from these programs, wealth managers can adopt the hybrid approach with digital strategies to win over the new generation of investors.

The threat of Job Loss

One of the biggest challenges of digitisation across various industries has been the resistance of automation due to fear of job loss. The wealth management industry is no different. The existing workforce has always resisted automation, often based on misplaced concerns of displacement. The key to successful automation is change management, wherein wealth management advisors and middle/back office staff are educated on automation and its benefits to their work processes. Identifying champions within the employee fraternity, along with consistent and clear communication, can be critical to enabling a non-disruptive and effective transformation.

Wealth managers stuck with Legacy systems

Most wealth managers are stuck with rigid legacy systems and disparate data sources implemented in silos to address a particular problem rather than a holistic transformation. As firms are gearing up for a full-blown digital transformation, they struggle to integrate/replace existing core systems with new digital experiences and mobile apps. Firms can modernize the core systems (e.g., a multi-channel wealth management suite with front-to-back-office integration) to support compatibility with the latest technology and third-party systems with a focus on interoperability and cost-effectiveness. For example, a modern cloud-based and secure data management solution can easily and safely integrate with the latest front-end digital systems, compared to the legacy in-house data systems.

Security concerns for cloudification of data

Although cloudification can lead to significant cost and effort savings, it is not without challenges or concerns. Security of information residing with external cloud service providers is one major problem. Firms are much more comfortable with in-house data systems than hosting sensitive data on a third-party cloud system. 

Also, financial firms are apprehensive about the risk of vendor lock-in, which would make it difficult to migrate cloud assets in the future. Raising awareness on cloud technology and security features among senior decision-makers in wealth management firms will ease security concerns. 


The wealth management industry has been forced by the pandemic to operate digitally. This has left a long-lasting impact on investors and wealth managers. The modus operandi of wealth managers may have seen a permanent shift, with the focus being on enabling a digital ecosystem built on tools and measures for a remote experience without compromising on quality. 

From a service and product perspective, the focus is steadily moving toward personalization, driven by effective data analysis. The spotlight is shifting toward tailored products, customized advisory services, and flexible pricing models for all investor classes. These changes have one strong enabler in common – the aggressive use of technology and accelerated digitalization either organically or inorganically. For people-centric and relationship-driven businesses like wealth management, effective use of technology through an omnichannel delivery model is essential to drive the right amount of customer collaboration.

Wealth managers can look forward to investing in-house technology, aligning with tech vendor capabilities, and exploring strategic transactions with tech-enabled players (M&As, JVs, partnerships and R&D collaboration, etc.) for the timely enablement of modern investment solutions, staying relevant to diversified investor segments, and staying ahead of ever-increasing competition.




Roland Berger: Rewiring asset and wealth management

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This is a guest post by Yash Surana, who is a CA and an MBA (Finance) from SPJIMR, Mumbai, and loves writing about finance, strategy, startups & Personal Finance.

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