blog from CREALOGIX Group

Do wealth management firms need to become technology businesses?

By David Joyce, CEO, CREALOGIX

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| 11/11/2019 12:00:00

Wealth management is facing a wave of digital disruption. To succeed, established firms need to ask “what business are we really in?”, commit to a clear vision, and pursue strategic alliances with specialist technology providers who complement their core strengths

The growing importance of technology to the wealth management sector is impossible to ignore. A new crowd of digital-native challengers is demonstrating that the needs of investors – whether mass market or high net worth clients – can be met in completely different ways from traditional business models.

Mass-market guided passive investing services like Wealthsimple and Nutmeg have shown that at least certain types of investor can be well served without bricks-and-mortar offices – in fact with barely any human interaction with advisors at all.

In other categories, mobile share trading apps such as Robinhood in the USA, peer-to-peer lenders such as Zopa and Funding Circle, and new players offering direct access to more exotic assets such as Carbonex (carbon credits), Maecenas (art), and Aston Lovell (wine), are all raising the bar for what investors expect from digital investment services.

We also expect to see more savings and investment-like offerings start to come to market from big tech brands such as Google, Amazon, Facebook, and Apple – not to mention Chinese brands like Alipay.

This exponentially expanding digital competition poses a real and present danger to established wealth management brands. Even if the disruption largely begins with smaller investors, it’s the simultaneous pressures of rising digital user expectations and the loss of mass affluent market share, which together mean that higher-end wealth management brands can’t afford to bury their heads in the sand.

Understanding WealthTech without trying to become one

Investment and wealth management tech market map by CBInsights, 2017. The field has expanded substantially since the time of this review. (

Faced with growing competitive pressures, all of which tend to have digital themes, traditional wealth management firms may come to believe the only way to compete is by transforming themselves into technology businesses.

But digital transformation doesn’t necessarily mean going against the grain of your established business model. Instead, wealth management firms need to use technology in the right ways to deliver efficiencies and create greater value, while remaining true to their core principles of trust and personal service for high net worth clients.

By asking “what business are we really in?”, leadership teams ought to recognise that efforts to build up large amounts of in-house software and IT expertise detracts from investment and focus on their core principles.

In order to thrive in the digital era, firms need to first define the key areas of value creation on which they want to focus, which in the case of wealth management firms and private banks are unlikely to mean in-house software and IT innovation – although there is certainly a requirement for innovation in terms of the products and services offered to customers.

While every process and service nowadays ought to be reconsidered in the light of new digital ways of working, firms should carefully consider the internal resources that are likely be absorbed by highly customised in-house solutions, versus engaging specialist third parties. Those that hone this process will gain a competitive advantage through faster innovation, industry-leading infrastructure, and tried-and-tested best practices in software development and IT service management.

Partner for success
Over the past decade, many industries have experienced an explosion in digital service providers, many of which successfully support traditional firms in their space through strategic partnerships. Take the marketing industry for example: in 2011 the marketing technology landscape as tracked by Scott Brinker on consisted of approximately 150 solutions – today there are over 7,000 specialist providers in this space.

Marketing technology brands in August 2011 tracked by Scott Brinker (

Marketing technology brands in April 2019 tracked by Scott Brinker: a huge explosion of choice in vendor and partner opportunities and competition. (

Many of these marketing technology brands are highly relevant to a modern wealth management business. But the wider point is that almost every conceivable area of tech expertise has experienced the same explosion of choice and competition. Any non-core value engine of a business can be outsourced to or supported by specialist providers; conversely, attempting to ‘reinvent the wheel’, particularly in terms of software and technology capabilities, seems increasingly irrational.

As with Martech, we’re now starting to see a proliferation of specialist WealthTech providers serving the B2B needs of the wealth management space.

Established wealth management firms should take advantage of this growth in specialist service providers. Creating digital investment products or building customised technology platforms to manage clients’ investment strategies, while simultaneously maintaining highly personalised client relationships, is a major challenge requiring considerable time and effort. Firms that continue to pursue these conflicting objectives under one roof are unlikely to succeed in the face of challengers pursuing a single value creation strategy.

Stay focused
There’s a negative side to all of this though. The sheer volume of specialist technology providers in the sector can be overwhelming for traditional firms. Without a clear strategic focus, firms risk being inundated by potential solutions and sales pitches that may not match their needs.

Even solutions that fit a firm’s needs best require a lot of effort in adoption and change management to deliver the expected value. This can be a huge drain on resources, especially if the firm is trying to move fast in response to digital competition, with several technology change initiatives running simultaneously.

To prioritise, firms need to keep a strict focus on who they are, what they’re trying to achieve and the technology they need to address specific business problems, before attempting to identify specific digital partners. A well-defined need must come before a search for solutions.

This means an expanded role for procurement, with a greater number of strategic alliances and a focus on managing these relationships with clarity, transparency and agility. Equally, chosen partners need to understand the firm’s market, strengths and strategy so that the relationship is one of mutual and long-term collaboration rather than short-term or disengaged projects. Businesses that can build complex, inter-dependent alliances in this way will be far more competitive than conservative or isolationist firms that try to go it alone.

It’s this strategic shift, rather than digital transformation in itself, that will allow wealth management firms to amplify their core strengths using the tools and technology skillsets of the WealthTech pioneers. To compete effectively in the digital era, financial brands need to transform their business operations and approach to innovation, but not necessarily change their business models or attempt to transform themselves into software developers.

David Joyce is CEO of CREALOGIX in the UK. David drives our vision of product innovation and champions the closely collaborative delivery approach which has been valued by our wealth management and private banking clients for over two decades.

More than 550 banks and wealth management firms worldwide are able boost their business growth and profitability by leveraging CREALOGIX software to modernise and continuously improve their end users' digital customer experience.