By Garry Hamilton, Chief Growth Officer, Equator
The pandemic has ushered in an era of systemic change for wealth management. While some firms welcome the chance to adapt to emerging challenges others still shy away from them. It’s becoming increasingly clear, however, that digital transformation is critical to the future success – even survival – of many businesses.
Wealth management is not alone in needing to rapidly replace outdated operations to suit remote client relationships. Plenty of other industries, from physical retail to entertainment and leisure, have been caught on the hop.
But the pandemic’s effects whipped up a perfect storm for many wealth management outfits that were typically built around offline relationships.
Fast forward a year, and many players have managed to achieve a level of digital servicing. Yet change has also exposed major vulnerabilities and limitations. It has meant a patchwork of fixes – from Zoom consultations to standalone customer management solutions – resulting in questionable GDPR compliance, and guaranteed inefficiency.
It’s fair to say wealth management was reaching a tipping point even before COVID-19 hit. The pandemic has simply accelerated the need for transformation; providing customers with modern digital solutions alongside more traditional services. The prize for wealth management firms is contented clients and enhanced efficiency.
Based on our knowledge of this complex market we have identified eight paths through digital transformation that wealth management businesses can take to grow value. In this piece we’ll be delving into the first four.
1) Technology diligence is a key enabler of value creation in consolidation plays
Wealth management providers face often unanticipated difficulties when buying or merging with other firms, born of splicing multiple software, investment platforms, and ultimately incompatible processes. The result is technology that’s more akin to Frankenstein’s monster than streamlined systems.
Of the 10 companies we researched in our study that underpins the eight paths, we found five different content management systems in play; multiple different portals and CRM databases; and many differing ways of presenting services, content, and engagement.
The danger is that, if left unchecked, acquisition could reduce efficiencies and grow costs.
PE businesses seeking acquisitions can employ strategic planning during the process to ready a digital estate for rapid action. Having a digital strategy and roadmap energises organisations, embeds a culture of change, and creates a framework for evaluating effort.
Action for PE houses: A robust digital assessment of core business platforms, ERP systems, and sales and marketing solutions will give an independent view of your business today, show where you want to be tomorrow, and determine planning and budgeting.
2) Exploit AI for a competitive advantage
AI arrived on the wealth management scene with the bold promise of becoming the sector’s saviour. The technology is already addressing many pain points, including admin tasks, managing risk, and scaling.
Yet none of the businesses we studied appears to be using AI. If they are, you wouldn’t know it as they don’t promote AI-driven services. This is clearly a missed opportunity to become more efficient, more effective, and to create value.
In risk management forward-thinking firms are harnessing AI to minimise this burden, which is undoubtedly driving businesses out of the industry.
UK-based, PE-funded start-up Aveni has developed a platform designed specifically to manage and monitor risk. It uses Natural Language Processing technology to monitor customer calls for compliance, risk, and opportunity.
AI is also creating opportunities through algorithmic trading. From fund selection to portfolio optimisation, quantitative trading and real-time systematic investing, AI can make wealth managers more effective and efficient – allowing companies to scale quicker and more easily than was previously possible.
From de-risking to more efficient trading, the benefits of AI are compelling.
Action for PE houses: Evaluate your targets’ current AI adoption, and check whether innovation plans seek to take advantage of AI and its capabilities.
3) Maximise untapped opportunities to improve customer experience & staff effectiveness
Digital technology affords wealth management firms new opportunities to improve both staff effectiveness and customer experience. Benefits of adopting cutting-edge platforms range from delivering personalised relationships to enabling first-class self-service.
The tech comes in a range of formats. Modern administration platforms such as Fintech Automation integrate multiple service components of wealth management into a single software platform, covering automated account opening, trading, and accounting.
Alternatively, full-stack digital wealth management platforms – such as Berlin-based, PE-funded tech-house Elinvar, which offers a complete Platform-as-a-Service for wealth managers – can handle a complete spectrum of activities. These range from trading and customer experience, to portfolio reporting, and empowering investment decisions and research.
Other options for digitising services include:
- developing customer companion apps that embed service and sales for cloud-based trading and CRM
- using Robotic Process Automation to reduce paperwork and unnecessary phone calls, and accelerate data analysis
- investing in Field Service Management software to boost security and efficiency for mobile workers
Action for PE houses: Invest in research to understand business needs and pain points, ensuring chosen digital tools relate to customer journeys and demands, as well as employee inefficiencies.
4) Properly leverage CRM
It’s tough to hold any specific marketing activity accountable without having an integrated CRM strategy in place.
Sadly, our analysis revealed very limited use of effective CRM amongst the firms we studied, rendering them unable to objectively report on the performance of their new business activities.
Tools like Hubspot and Pardot bring exceptional visibility to sales performance, lead management, and conversion. They allow businesses to:
- view the status of contacts and salesforce effectiveness
- understand via dashboards the quantity and status of leads and team targets
- manually or automatically capture leads from website, email or third-party channels
- automate lead assignment and nurture
- deliver outstanding experiences using personalised communications; reducing customer journeys and boosting retention
The time savings alone made from deploying CRM tools typically cover their cost, but fully integrating them into your business processes and lead management prompts far better returns.
Action for PE houses: Integrated, cloud-based CRM is the most effective tool for consolidation and extracting value. The right configuration and customisations will allow the business to exploit automation and drive new fee-earning opportunities. In the next article we’ll consider the final four paths to value growth through technology.
