Posted Jan 29, 2019

Fintech Is Disrupting Wealth & Asset Management- Time To Act!

Wealth management is still in early stages of digitisation.The industry isn’t moving anywhere near as fast as the innovations in payments and consumer and retail banking sector, however the same driving forces – 24/7 digital availability, compliance, personalisation and transparency are propelling the digital shift in wealth and asset management. 

The existing wealth management business model has been slow to witness digital transformation due to a variety of reasons, mainly due to a strong focus on developing face to face relationships with high net worth (HNW) clients. There has also been reluctance to adapt digitally due to issues surrounding legacy infrastructure and systems and a complex regulatory environment. 

In fact a recent survey* of 15 of the largest wealth management firms in the UK with a combined AUM of over £400 billion, over 35% of respondents said that they only dedicate between 5-10% to digital change, while a further quarter stated it’s between 2 and 5%.

However, many firms are beginning to realise the advantages of moving towards an increasingly “high touch, high tech” hybrid wealth and asset management model. This model focuses on the importance of building the physical client relationships but leveraging the digital technology to provide communication, automated advice, a digital view of their affairs and personalisation. Forward thinking wealth management firms who are taking steps to master this will begin to quickly differentiate themselves in the market. 

Let’s take a look at some of the digital trends happening within the wealth and asset management industry:

Rise Of Robo-Advisors 

The rise of new technologies are now enabling new challenger organisations and FinTechs to enter the market with innovative, hassle- free and personalised digital-driven wealth management offerings. New players and robo-advisors are implementing technologies which can predict future investment opportunities based on analytics and some firms are allowing members to post their online portfolios and compare performance via social media and virtual communities. 

Over the last few years, we’ve seen a substantial increase in the number of robo-advisors that provide investment advice based on mathematical rules or algorithms that require little to no human interaction. The software uses these algorithms to automatically allocate, manage and optimise clients portfolios in real time.

Estimates for the future Robo-Advisory market by several well-known institutes predict between:

  • $ 2.2 trillion and $ 3.7 trillion in assets to be managed with the support of Robo-Advisory services in 2020.
  • By the year 2025 this figure is expected to rise to over $ 16.0 trillion assets under management (AuM),roughly three times the amount of assets managed by BlackRock, the world’s biggest asset manager to date.

Robo-services allow organisations to deliver better and more flexible client outcomes. By quickly learning risk tolerance and investment goals, a robe-advisor can deliver better customer insights and appropriate allocation of assets. 

Most traditional wealth and asset managers are not looking to replicate the robo-advice model but they should be taking steps and developing their own tools to augment their personalisation approach.

Changing Client Expectations & Transfer of Wealth 

Perhaps most importantly, client preferences for how they communicate and handle investment decisions are changing. Although the personal relationship building will always remain central to the asset management business model, it is now so important that wealth managers should now view digital not as a replacement for their personal client relationships, but rather a tool that offers their clients better convenience, more flexibility and a more personalised experience. 

The transfer of wealth to younger, digitally savvy clients is happening. Even High Net and Ultra High Net Worth individuals have become accustomed to online banking services, personalised information and are avid users of mobile and digital devices. 

The advancement in mobile technologies and smartphones have created a plethora of opportunities to create apps to engage and share information with clients but only a handful of wealth management firms are currently tapping into these technologies. Many apps available today are limited in functionality and do not even begin to scratch the surface of clients expectations. 

This is backed up by a recent report by Thomson Reuters* which reveals that 68% of wealth management firms say learning and keeping up with new technologies is the top challenge they face while 69% are concerned about staying relevant to a younger generation.

Shift To Mobile 

The availability of mobile wealth management products has grown by 300% in the last 2 years*. Firms are developing mobile applications that allows their clients to view their portfolios, check account balances, see market performance at a glance, send secure messages as well as offering biometric security authentication procedures. 

A report by McKinsey found that In fact, the mobile experience, including apps and the mobile web, is one of the two most important channels for affluent clients when considering whether and where to move assets. Clients who engaged through a mobile experience (e.g., the mobile web or an app) were 3.5 times more likely to move assets than clients using other channels. 

One way to adjust digital strategies is to offer more encompassing, sophisticated apps. That means taking the features wealthy clients tend to use more often into consideration, ramping up portfolio-analysis tools and investment status updates, and boosting the app’s communication functionality.

Forward thinking wealth and asset management firms should be looking at opportunities where data can be collected, analysed and used to push personalised information, communication and recommendations to the most powerful piece of software that lives in your clients pockets. This could include things like allowing investment portal access via mobile or tablet, using mobile to bolster security including incorporating biometrics and creating apps that allow clients to get in touch with personal advisors on a secure channel.

Benefits of Wealth Tech To Clients:

  • Greater transparency of portfolios and strategies available “anywhere, anytime”
  • Freeing up advisors from burdensome admin to focus more on building the client relationship
  • Enabling advisors to communicate quickly and effectively with clients who favour a more digital first approach 
  • Improved asset allocation strategies 
  • Portfolios can be build ore efficiently with a stronger focus on consistency and flexibility 
  • Compliance tracking and easier oversight of portfolios by investment committees 

New Digital Players 

We’ve compiled a list of some companies we think are doing some pretty interesting stuff in the wealth and asset management industry. 

Wealthfront

Wealthfront offers their clients digital services that help them plan for retirement, invest their savings or help them save to buy a home. It has a small and transparent advisory fee. Their aim is to make wealth management easily accessible and understandable for different segment markets. It’s one of the leading startups in the wealth management tech space with over $8bn AUM as of August 2017. 

Wealthify 

Wealthify is a UK based robe-advisor which invests Exchange Traded Funds (ETF’s) that keep clients investment management costs to a minimum. It uses an automated process and algorithm to create portfolios that align with clients risk appetites. In 2017 Aviva acquired a majority stake in Wealthify, showing the appetite of traditional financial institutions to partner with fintechs as it represents the future of the industry. Advisory fees are so low that they are able to attract large numbers of clients, boosting their profitability year on year. 

E-Toro 

E-toro have developed a disruptive trading platform that acts as an investment network that offers social trading solutions through it’s community-powered network. The platform allows investors to see, follow, and automatically copy the actions of other investors o the platform in real-time. E-toros mission is to make the financial markets more accessible for every individual through a simple, transparent and more profitable way to invest online. They allow their users to explore and ever-expanding variety of crypto-currencies on their cryptocurrency platform. 

It’s Now or Never 

Wealth and Asset Managers now have the chance to embrace digital technology to create better client experiences, simplified customer journeys, personalised investment information, address new market segments and more. Technology, particularly mobile and web portal technologies also offer wealth and asset management firms to automate and streamline complex back-office processes which will ultimately free up admin burden, leaving advisors free to focus on what matters. 

Fintechs do not need to be viewed as a threat, in fact many firms are capitalising own the opportunity to partner up with companies who can offer speed, agility and more efficient ways of responding to client and consumer expectations and preferences. 

How Can xDesign Help?

We’re working with a number of forward thinking financial services and wealth management organisations to build bespoke mobile and web application software that addresses these needs. Whether you are a small boutique wealth and asset management organisation, or a large well-established company with an entire dedicated digital and IT team, we can help. We partner with you to discover new digital opportunities and design and build bespoke robust, secure and beautiful mobile and web apps. We can integrate with existing systems or simply suggest ways in which data can be leveraged in a new way.  We can help you to build digital MVPS (minimum viable products) that will allow you to test the idea in market. 

Interested? We’d love To Chat! Contact Us

You can also download our latest Whitepaper Financial Services: Digital Challenges & Opportunities for further reading

Download Whitepaper 
*McKinsey, Transforming Customer Experience In Wealth Management 

Published by

Mairead Quigley

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