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Using technology to engage with clients: The view from additiv (part 1) - market view

Answers by Silvan Schriber, Head of Corporate Development at additiv and Christine Schmid, Head of Strategy at additiv

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by additiv
| 22/06/2020 14:41:38

What is your view on the current state of the market with regards to how wealth managers manage their engagement with clients? What are they doing well, what are the challenges and what areas could be improved?

1.1. Current status & challenges
Before the pandemic, the ripples of digitization were there to see, but the pressure for decisive change was limited. Incumbents considered digitally-native competitors as niche players attracting digitally interested clients, thereby starting to put revenue margins under pressure. Increased compliance requirements and a legacy technology stack caused production costs to rise. The growth in assets mitigated the situation, but didn’t fully offset these effects, so overall profits were stagnant. Hence, a worrying picture for the wealth management industry, but not disastrous.

The crisis has aggravated the velocity and the impact of these trends. This has led to a fundamental shift in client expectations and market player awareness, which constitutes the outset of an unprecedented transformation in operating, servicing and sourcing models. Wealth managers will need to quickly match up to the demands of customers.

“Wealth managers entering the Covid-19 Crisis are worse off than before the global financial crisis.” BCG global market sizing and wealth manager performance benchmarking databases

Wealth managers will have to conform to growing demands for fairness and transparency that, post-crisis, will certainly increase as people call for better omnichannel advice and greater value-add in managing their commercial and financial affairs. So, in short, the pandemic is introducing the need for substantial and resolute change, and at the same time is stripping wealth managers of the financial resources and runway to make the required change happen. Consequently, this may create an impossible balancing act. But this is why we have introduced our additiv KickStarter™ package for the wealth management industry to resolve this seemingly irresolvable challenge in a short space of time.

1.2. Impetus to change & potential benefits

"75% of clients currently prefer digital interactions or phone calls as their primary method of engagement.” EY 2019 Global Wealth Management Research

Report Establishing and maintaining a remote relationship has never been more important. Clients expect to access their wealth managers and their services instantly at any time, from anywhere, through any channel, seamlessly. And in times of crisis, this access is even more essential. Clients increasingly demand an omni-channel interaction model that includes digitalonly as well as digitally supported interaction models, namely real-time online advisory. The importance of digital interaction models is levelling in importance with face-to-face meetings and phone interaction.

With traditional relationship management channels such as physical meetings currently suspended indefinitely, many wealth managers and independent financial advisors are ill-equipped to support their clients’ needs. This inability to support is creating inefficiencies and relationship tensions during an already stressful time when advice is in high demand. Market players that can offer omni-channel interaction are at a competitive advantage for establishing presence at a low cost and gaining market share.

1.3. Opportunities & actions
As many struggle to meet the challenge of remote working and the stress of fast-declining margins, there are some market players that do see this as a real opportunity. Despite operational disruption and changing demand, a global crisis can often trigger radical innovation, new operating models and emerging distribution opportunities.

We believe that any player in the wealth management industry has the possibility to profit from changed client expectations and the opportunities that are offered by technology in wealth. The optionalities are wide, ranging from transforming or complementing the existing advisor-lead business model, to the launch of a fully-fledged self-service digital value proposition, winning a new client segment not serviced before, or entering into a new region.

For all wealth managers, the flexibility regarding how they can run their operating model has increased dramatically. The ecosystem opportunity that first materialized in technology and other industries has visibly arrived in the financial services industry. All market participants should challenge their operating models in order to fully leverage the opportunities that are emerging in a “everything-as-a-service” economy

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This article was originally part of The Wealth Mosaic's WealthTech Views Client Engagement Report. You can access and download the full report here: