Capgemini's Wealth Management Top Trends report highlights the affluent segment as a key opportunity for wealth management firms to boost their top line. As the total addressable market size for fee revenue in the affluent segment is estimated to be up to USD 40 billion annually, this presents a significant opportunity to wealth managers. While Capgemini state that the affluent segment is not currently being targeted, we are now beginning to see the ‘affluentisation’ of wealth management in action with Swiss Private banks, such as, UBS launching My Way, a modular portfolio management journey starting at 250K € of investable assets or Vontobel launching Volt, a digital wealth management service, allowing their clients to invest according to their convictions with a recommended starting amount of just 25,000 CHF.
While Capgemini lists price as the primary consideration for wealth management firms when targeting the affluent segment, technological transformation has lowered the barriers to entry and made it possible for affluent inclusion in the wealth management space. To make a mass affluent journey profitable it must be highly scalable, to the extent that one portfolio manager can look after thousands of clients, while at the same time it must provide a fantastic client experience for the consumer in line with the journeys for the HNW and above. This article will focus purely on the client experience aspect. In this regard, we will look at why client experience is key to addressing the affluent segment, and what wealth management firms need to consider when creating investment journeys.
A new tech-savvy clientel
To start with, we need to understand who the client is that the wealth manager will address? Through another key current trend in the wealth management industry, we are seeing a shift towards a new tech-savvy clientele. The great wealth transfer which will see 72 Trillion USD being inherited by Generation X, Millennials and Gen Z over the next 20 years means that the type of client that wealth management firms serve will also change. This means that most of the clients will be in a different stage of their life and furthermore, digital natives. They will therefore expect a true digital experience in their wealth management journeys. It is no surprise, therefore, that both UBS and Vontobel market the availability of their offerings via smartphone, emphasising the need for a true digital experience for these affluent journeys available through the clients preferred channels, always on and always available. Concomitantly, a great client experience will provide a truly omni-channel journey for the client.
Hyper-personalisation
With the rise of digital natives entering the consumer space, not only will a multi-channel journey be expected, but the experiences and the expectations of journeys are no longer measured against other wealth management peers, rather, against other industries. Tiktok or Instagram can recommend a video to their consumers, knowing they will like it without having to ask. This is the level of experience digital natives have come to expect. Therefore, to appeal to this affluent segment, wealth management firms require hyper-personalised offerings. A clear example of this is through impact investing. With the growth of the environmental, social and governance (ESG) investing, we have seen an example of clients personalising their portfolios to align with their values. “The uptake of a more thematic approach to sustainable investing is providing them an opportunity to utilise their capital to support outcomes that align with their personal values, be that green energy, clean water, smart cities, gender equality or more” An example of such an offering is Radicant, a Swiss bank focusing on sustainability. The bank allows clients to align their portfolio with the UN’s Sustainable Development Goals (SDGs). Designed to generate long-term returns while contributing to the achievement of the 17 UN Sustainable Development Goals (SDGs). These journeys allow affluent investors to secure their financial well-being, at the same time adding a positive contribution. Therefore, when creating new journeys, the core idea of hyper-personalisation is precisely the segment of one, that each client can personalise their portfolio to align with their own goals.
Here, wealth management can take inspiration from the retail industry. With their digital transformation, high street brands were able to offer on brand experiences online and off, and through the leveraging of technology they could track customer interactions across each touchpoint, enabling personalised marketing, efficient customer service and a cohesive shopping experience. In summary, the trend of sustainability as a personalisation example, has the potential and power to enable new attractive and client-focused business models and attractive (service) offers for financial institutions. This is especially true in the context of the great wealth transfer and the needs of the younger generations which will soon be very wealthy. At the same time, this could promote the transformation of financial flows into sustainable investments, as envisaged by the EU Commission in terms of the taxonomy and disclosure regulation.
Client needs
The needs of clients are also changing, while baby boomers have been in the decumulation phase, these new inheriting generation are accumulating their wealth. Furthermore, as opposed to the HNW and above, affluent clients have different aims when investing their money. While HNW and above may focus on growth or estate planning, affluent clients need a more goals-based approach. For example: Do I have enough money to go into retirement? Can I afford to gift money to my children earlier etc. Therefore, a different approach is needed for these clients moving to a client-specific approach as opposed to a client centric approach which we have previously seen. Goal-based journeys align more with the needs of the affluent segment providing a holistic approach to their finances.
In summary
To conclude, the trend of wealth managers targeting the affluent segment has already begun and this is a key market which can support wealth management firms to increase their top line. To take advantage of this segment wealth management firms need to offer scalable solutions without losing the ability to personalize these journeys. These journeys are for a demographic that expect communications which are direct, succinct, and accessible via their preferred channels. They must empower the clients to reach their goals and invest in line with their own personal values by providing a truly personalised experience to the client.
Interested in accessing the Client Experience Toolkit 2024? You can read the report online here.
ABOUT AIXIGO
aixigo provides the world's fastest API-based Wealth Management Platform for creating individual, innovative and profitable wealth management services! The high-performance aixigo:BLOXX of the Wealth Management Platform provide all technological capabilities for the application in investment advisory, portfolio monitoring and analysis, portfolio management and financial planning.
aixigo's platform enables banks, financial service providers and wealth managers to master the challenges of digitalization and empowers them with speed, scalability and flexibility. aixigo’s international customers, including Bank Vontobel, BNP Paribas and Commerzbank, are already benefiting from the aixigo platform.
Furthermore, aixigo was awarded the Banking IT-Innovation Award by the University of St. Gallen (Switzerland), the German Innovation Award by the German Bundestag and the German Industry, and was repeatedly included in the WealthTech100 by FinTech Global.
For more information, visit aixigo’s profile here.
ABOUT THE CLIENT EXPERIENCE TOOLKIT 202
The Client Experience Toolkit 2024 is the first in a new series of Toolkit reports focused on key technology themes and tools impacting global wealth management. Each Toolkit report focuses on a key wealth management theme, segment or geography.
This first issue takes the form of a thematic report and shines a light on the trends and solutions influencing the successful delivery of client experience (CX) in wealth management. It features 11 showcases, each centred around a dedicated CX-relevant topic and related solution.
The report will be distributed at the Client Experience Toolkit Roadshow, hosted at individual events in Geneva, Zurich, London, Singapore and Dubai in late September and into October. These are free to attend for any form of wealth manager and provide technology vendors an opportunity to sponsor or demo.
Join us at the Client Experience Toolkit Roadshow 2024: