Let’s be clear, while the terms digital, digitisation and digitalisation (or any other variant) are all around us today, for wealth management, a sector consistently deemed to be a technology laggard and slow to adopt, we remain near to the start of the digital journey. Indeed, what that means, what the constituents of a digital journey are, what influences are shaping that journey, where it will take us and, most importantly, how that will reflect the characteristics, preferences and needs of the client are still to be determined.
Given this backdrop, in fact, many in the sector still question what digital actually is in the context of the wealth management. It’s definition changes for every individual and institution you talk to.
As background, this piece has been inspired following our attendance earlier this month at an Appway-hosted thought leadership event in London. Titled the ‘Digital future of wealth management: How to meet changing needs’, the event was co-organised and moderated by Steve Dyson, director at London-based consultancy firm Investment and Wealth Management Consultants, and featured panelists: Sebastian Dovey, co-founder of research and consulting firm Scorpio Partnership and Wealth Briefing’s 2018 Wealth Management Thought Leader of the Year, Sasha Dabliz, former Marketing Director at Rothschild & Co, Dr. Eliza Filby, a speaker, writer and consultant who specialises in a history of generations and contemporary values, and Stephen Manly, UK Sales Director at Appway.
While the context of the discussion was digital and changing needs, two things caught our attention. First, the industry’s view on the importance of client experience but, second and alongside that, a sense that the industry has a huge amount to do to align itself, its thinking and its model to the needs and characteristics of the future generation of investors. In our opinion, there is a big gap to close.
While this is an industry with a history defined by people and relationships, there remains a big question as to whether the needs of the client have played a large role in shaping the sector’s offering. Typically, that has been determined by internal forces. In the digital age, however, the emphasis on the client relationship, the preferences of clients and what they want from the industry will become stronger forces as technology plays a deeper role. The industry will have to react to that new source of strategic shaping. In digitisation, there is much more to consider than just the technology.
In a poll conducted during the event, the audience were asked what the key driver behind the digitalisation of wealth management in their company is. For the majority (67%), the focus was on the capability to improve the customer experience.
According to Dovey, the key to customer experience, and why it is important, is its clear link to the commercialisation of the model and the desire to increase business revenue. Better experience = higher revenue. To Dovey, technology is an enabler of a better, more consistent customer experience. A very valid and rationale base to value the customer experience.
How it is then delivered, whether human, technology or a mix is not just a question of the industry’s preference and the capabilities of technology, however. As the sector moves forward to become more technology-enabled, the client experience also needs to be defined by a laser-like engagement and understanding of the needs and preferences of those client.
From our perspective, however, the industry still has much to do to understand, define and deliver on what its future looks and, specifically, with a view that strongly incorporate the client’s perspective. There is increasing understanding but we see a clear gap between conventional wisdom as it is today and what the future client will demand. As with the technology aspects of the digital journey, we remain in the early stages of understanding what the future client wants and how the industry should respond.
Indeed, maintaining a consistent view of the customer experience is also not a one-time effort. The panel sees the definition of the customer experience as being in constant flux, a theme that will increase with more digitalisation and the thinking of different generations. The industry needs to frame its digitisation efforts within an ongoing process to engage and understand what their existing and future clients want.
And this is where we get to a potentially major area of concern. Is the industry really planning with the needs of its existing and future clients in mind? And, if not, is it simply wasting its efforts?
According to Filby, there is a basic challenge in understanding what the client wants, especially when considering what the future generation of clients might want. She gave some examples. For instance, while we might all assume that Millennials and Generation Z value only digital interactions, they in fact value human interaction above all other forms of interaction. They see human-led service delivery as a luxury and will seek it out as a high value experience.
While that might be music to the wealth management sector’s ears, how many would have a clear idea that this demand was the case? And how does that fit with the industry’s drive to digitise? At the very least, it raises questions about our understanding of what is coming.
Future wealth holders valuing human interaction might sit well with the industry but, in listening to Filby, how the industry views itself will not have the weight it has now. For future generations, it will be the client determining what they value as luxury, not the industry. The industry’s job will be to consistently understand what luxury means to its future clients and to react and deliver it.
Going further, the industry will also need to account for other factors and expectations driven by the experiences and environment of Millennials and Generation Z. These will include things like being less deferential, passive and silent, characteristics which have been heavily influenced by the freedom of expressions allowed through social media, and also being obsessed with their data, monitoring it and wanting transparency around their data.
Also, from an investment perspective, younger investors also have a different view of investments. Their view of the world will be influenced by their experiences and they will move the goalposts in terms of what is expected. Environmental, social and governance is already a strong topic. Looking forward, will meat producing firms be considered sin stocks, for instance? Given the behaviour highlighted above, they are also likely to be more active investors.
That the industry values the customer experience is very positive. The event, however, left us wondering to what extent the wealth management industry knows what is coming, is open to listening, learning and integrating those learnings into its increasingly digital journey. While technology is increasingly seen as a core part of the current and future make-up of the sector, it does not live in a vacuum and must be delivered with the needs and preferences of its client base at its core.
True digitisation of the wealth management sector will only be delivered with a strong base around human needs and preferences enabled through the capabilities of digital technologies.
