Delving into the top trends taking centre stage in wealth management during Q1 2024
It is fair to conclude that sustainable investments, the rise of AI and gamification were among the most inspiring trends in the wealth management sector during the past year. The gloomy economic outlook of 2023 is likely to continue challenging businesses in the year to follow. The geopolitical and macroeconomic challenges are not closer to any resolution, leaving the wealth management sector to focus on clever applications of technology to ease the pressure on the margins and comply with an ever-growing number of transparency requirements.

For instance, in the UK, wealth managers are expected to meet the Consumer Duty demands by the FCA. In the context of sustainable finance, fund managers are expected to be focused on implementing the FCA’s Sustainability Disclosure Requirements.

Apart from tougher regulations, Generative AI was one of the key topics discussed last year in wealth management firms and across the global economy. According to Statista, the market size of the technology providers is projected to reach $66.2bn in 2024 and will reach a value of $207bn by 2030. The appeal of the technology is growing among financial institutions, too. In fact, per Finastra’s annual global State of the Nation Survey released at the end of 2023, the core technologies the financial services sector invests in are Generative AI, embedded finance and Banking-as-a-Service (BaaS).  This indicates the continuation of the digitalisation trend – and the focus is on building seamless and personalised experiences.

Let us dive into the top trends that will set the tone for the sector for the first quarter of 2024 and consequently, the rest of the year.

Embedded finance is “core” to business, not an initial bet
Embedded finance offers an opportunity for companies from various sectors to effortlessly integrate financial products into their customer journeys. Embedded finance grew to a $2.6 trillion industry in 2021 in the US alone, with nearly 5% of financial transactions embedded into e-commerce and other software platforms. According to Bain & Company research, by 2026, the share of embedded finance transactions will exceed US$7 trillion, representing 10% of total transactions. The major catalysts for this growth are the sector’s ability to improve customer experiences and financial access, along with cost- and risk-reduction benefits throughout the value chain.

Embedded wealth providers help firms reach new customer segments by enabling access to capital markets and offering lower-cost access to portfolio management. It is easy to see how 70% of banking executives believe that embedded finance will either become core or complementary technology to their business strategies, according to an IBM report. As Fredrik Daveus, CEO of Kidbrooke® put it, “Embedded finance has a far-reaching impact. It extends across various industries and reshapes the landscape of financial services. It democratises access to financial tools, making them more accessible to a broader audience. It also fosters innovation in how financial services are delivered and consumed.”

In a detailed post, Davéus elaborated on how implementing embedded finance includes but is not limited to partnering with payments and banking providers, offering pension, protection and investment financial services for corporate employees, and offering personalised and relevant investment services to individuals, thus democratising the industry at scale.

Consistency is critical for client satisfaction
In modern wealth management where a hybrid approach in physical versus digital debate became an accepted consensus during the pandemic years, the importance of consistency in decision-making among the channels cannot be overstated. A McKinsey study showed that digital adoption has moved from a question to a concrete reality, with approximately 73% of global interactions with banks now taking place through digital channels, forcing relationship managers to develop new strategies to ensure a seamless experience.

When it comes to the entire investment journey, a customer often touches different parts of an organisation’s applications — covering financial planning, trading and reporting —built on a range of platforms or acquired from third-party vendors. As a result, these legacy systems often communicate poorly with each other. Such a fragmented experience can erode trust and potentially lead to client attrition. In contrast, consistent financial planning experiences with a seamless information flows across all channels foster customer loyalty and trust in the brand.

Wealth managers can consider a scalable solution with unified data analytics at its core to achieve consistency in the entire investment journey, allowing cross-functional data access across the firm. Kidbrooke®’s unified, balance sheet-based approach can analyse different aspects of financial decision-making – regulatory requirements, taxes, savings, and pensions, among others, Daveus explained. This approach to analytics can bring the quality of the omnichannel experiences to the next level, helping firms provide a more comprehensive and seamless service. In fact, according to McKinsey, optimising consistency in customer journey experiences can lead to increased revenue and decrease the service costs by as much as 20%​​.

Navigating and streamlining data collection
Many financial institutions emphasise the importance of data readiness prior to initiating digital transformation. Given the high stakes involved in financial services, accurate and reliable approach to data management is paramount, not only for operational efficiency but also for maintaining regulatory compliance and customer trust. However, trying to get the data into the perfect state in a large financial institution with a long history and infrastructural debt can hinder an institution’s ability to adapt to the rapidly evolving digital landscape.

A more pragmatic strategy is to begin innovating with the current state of data, however imperfect it may be. This approach implies the development of digital customer journeys step-by-step. By releasing digital services incrementally and gathering customer feedback, financial institutions can refine their offerings and update the critical parts of the infrastructure as they go. This method allows for practical insights into what customers value and which data is most critical, thereby improving future predictions and advice.

Adopting this approach requires a shift in mindset from viewing data readiness as a one-time prerequisite to a continuous, evolving process. This perspective pays more heed to customer preferences and technological capabilities and encourages wealth managers to maintain agility and responsiveness in their efforts.

Consistently updating and innovating your tech tools, streamlining data collection, and refining digital services based on customer feedback and market trends is the silver bullet to staying relevant.

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