Year in review

What would you highlight as the main technology themes for the wealth management sector in 2021?
2021 was about consolidating some of the basic tech enhancements started in 2020 – improving electronic client communication channels and e-signatures on documents are two examples. While the tech debate is full of heady references to non-fungible tokens (NFTs) and Decentralised Finance (DeFi), many organisations are still in the process of ensuring that their essential functions are digital-ready.

For incumbents whose propositions are digital, it’s been about using technology to adopt and adapt to the wave of innovation in wealth management. Hyper-personalisation of portfolios, introducing new asset classes like crypto, NFTs, and private equity into the solutions mix, supporting embedded wealth management. They’ve looked to leverage technologies like the public cloud and open API FinTechs while having minimum connectivity to their legacy stack.

At the bleeding edge of the spectrum, we have seen organisations leveraging advanced technologies to set the trend. They use fractional share trading to personalise portfolios, use data to build direct indexes, and offer access to an extensive set of instruments like options and crypto through trading apps.

Why were those themes relevant in 2021 and what progress did wealth managers make in response?
In terms of digital transformation by incumbents, 2021 was a year of expression of intent. Many big brands announced their plans to spend big on tech to capture the digital wealth gold rush.

It’s fair to say that most organisations now have some level of digital capability to service clients and provide effective business continuity. Some low-hanging fruit has been harvested, but the digital transformation journey to get to the bare minimum, for many organisations, is only just starting.

However, on the emerging end, we’ve seen an eyewatering amount of money being spent on platforms like OpenSea for NFTs and cryptos, despite the recent crash in value.

Year in view

What would you highlight as the main technology themes for the wealth management sector in 2022?
Digital baselining – Many column inches will inevitably be dedicated to advanced tech concepts like AI, Blockchain, NFTs, DeFi, and now the metaverse. But I would urge organisations to focus on solidifying their digital customer experience, automating their ops, and future-proofing their core tech stack.

Client expectations are changing rapidly, influenced by the myriad of daily tech interactions. The modern investor is used to having their every need catered to via the UI/UX experience. To have to reign in expectations when it comes to their wealth management experience is likely to lead them to look for alternatives. Having a solid tech baseline is essential for organisations to react to this change in expectations.

Automation – good digital CX goes hand in hand with a high degree of automation. It’s also an economic imperative in a margin-pressured business.

New solutions and capabilities – hyper-personalised solutions, access to new assets like crypto, NFTs, private equity, and private debt

Why have you highlighted those themes and what do they mean for the wealth management sector?
The future of wealth management is inextricably linked to technology and digital channels to support scalable solutions. Even the most personal of interactions is going to be digital and virtual. Now, having the technology basics right is as important as it would have been yesteryear to have your physical office in the suitable locations, fully equipped with a fancy lobby, meeting rooms, scanners, envelopes, and stamps!

Therefore, my advice to organisations is to focus their attention on creating a roadmap to fix the tech foundations within their organisation to be highly competitive in leading their customer segments.

How should a wealth management firm tackle these themes and what targets should they set?
A good starting point is to take a step back and visualise what the business might look like without constraints. Looking around the competitive landscape at both traditional and new players tells you what other people are doing. Another good thought experiment would be to imagine what the business might look like if Apple or Amazon offered the same value proposition.

This starting point should be the catalyst to identifying what the organisation’s value proposition might look like to remain competitive.

Now you see where you want to go, determine what is holding you back and how to transform each blocker into an enabler. Picking the right partner to help realize this transformation and allocating resources to execute this strategy is also important.

Market status

Where is the wealth management market in its technology journey and what are the industry’s strengths and weaknesses in its use of technology?
Wealth management is not a monolithic sector. It breaks down into many sub-segments, and the answer to this question varies for each one. Some, like the self-directed apps and robo-advisory products founded in the last five years, adopt technology widely. In fact, tech is central to their offering. There are other segments whose technology adoption may be lagging and inconsistent.

One of the strengths of the wealth management industry is its sheer size – this makes it attractive to deploy capital for innovation- especially tech innovation. This has already resulted in some outstanding examples emerging from both startups and established firms showing how to leverage technology to win their market.

But one of the critical weaknesses of the industry is the fragmentation of the tech innovation landscape into front, middle and back-office, with a lot of the innovations happening in silos. There is a real need to think in a ‘jobs-to-be-done’ mindset and synthesise these isolated innovations into a seamless solution suitable for the needs of all the component parts of a business.

In terms of adopting and making the most of the technologies available, what are the main challenges wealth managers face and how can they overcome those?
When deciding on tech investments, the biggest challenge for an organisation will be the tricky balancing act between tech for firefighting versus tech for strategic growth. While the solutions in both instances might be the same, implementation might differ. Even with the best intentions, sometimes firms don’t get two bites of the cherry to do it right.

We are in a time where technology strategy must be a core part of any organisation’s regular strategic conversation. So here are some ways for firms to overcome problems posed by a reactive and set-piece approach to technology:

• Maintain a technology impact assessment that is in lockstep with the organisation’s strategy.

• Understand the key inefficiencies, experience gaps, and compliance gaps (collectively, problem statements) that exist within the organisation by engaging with key staff.

• Prioritise these problem statements - which inefficiencies - if streamlined - will save the most amount of money, which experience gaps - if improved - will attract more assets, and which compliance gaps - if unfixed - will cause the most significant damage.

• Create a tech roadmap and appoint a point person responsible for creating, maintaining, and driving this roadmap.

• Allocate an annual budget for technology – whether we like it or not, most organisations are now tech companies offering different services. The ‘jobs-tobe-done’ tech budget must now be treated much like organisations would have approached allocating funds for physical infrastructure in the past.

What are the main building blocks for any wealth management firm in making the most of the technologies available to them?
To maximise the ROI on tech investment, organisations must maintain an up-to-date inventory of technology in use, with an up-to-date business architecture document that illustrates how the tech is deployed and used, including usage statistics. This visualisation can help inform if the tech solutions in place are helping, to what extent, and any improvements that can be made to the way the stack is organised to provide optimal results.

Focus & solutions

Considering the themes identified, what is your role and what does your business offer to support wealth management firms?
At WealthOS, our goal is to eliminate technology frictions to the digital transformation of wealth management. Whatever the size of the organisation or the level of technology expertise, our platform and service proposition can help digitally transform any business. Here’s how we make it happen:

• Our cloud native infrastucture takes away the cost and maintenance burden of legacy architecture.

• Our comprehensive feature set enables all of the operations to be done on a single platform in a highly automated fashion.

• Our fully orchestrated APIs make it easy and cheap to connect digital experiences to the platform.

• Our no-code integrations marketplace simplifies the effort of automating workflows.

How will your firm further develop its offering to support the evolving needs of the wealth management sector?
We have already built the core functionality to power the basic management of any core wealth product (from onboarding to payments, to trading, to full record keeping). This means today, you can already run any type of execution only, robo advisory, digital DFM product on WealthOS.

This year we are augmenting core capabilities with further automation and expanding into supporting more tax wrappers like ISAs and pensions, developing fee computation capabilities and building a client communication engine. For more take a look at our 2022 roadmap blog.

So by the end of the year clients can:

• Create comprehensive digital savings apps

• Create digital retirement apps

• Support custom indexing

and much more using WealthOS.

WealthOS is always seeking to foster digital innovation through collaboration in the wealth industry. We’d love to hear and work with anyone who has ideas so we can explore how WealthOS can support your vision.

This article is from The Wealth Mosaic's WealthTech 2022 Report. Access the full report here.