Spokesperson: Bronswe Cheung, Partner, L.E.K. Consulting
Consumer Duty is reshaping the wealth management industry. In the UK, Consumer Duty is a set of regulations issued by the Financial Conduct Authority (FCA) that ensures customer outcome and requires companies to work towards understanding and fulfilling customer needs in a fair and accessible manner.
Firms can no longer get away with legacy pricing approach, one-size-fits-all services or poor management information. Instead, by leveraging data and AI, firms can now create tailored, efficient and scalable service models that meet both regulatory demands and client expectations.
The rising bar for wealth managers
With regulators taking a tougher stance, the period of poor customer understanding and poor regulatory reporting is over. Now Consumer Duty requires wealth managers to justify their pricing, make sure the product meets customer needs and communicate in a way that builds confidence rather than confusion. Firms must re-evaluate their client segmentation strategies, refine their propositions and invest in data-driven decision-making to stay ahead. Firms must also embed ongoing data collection to satisfy the regulator.
This is only achievable when organisations collect, analyse and act on high-quality client data. We have a three-pillar framework that helps businesses do this, by combining GDPR compliance, a robust data engine, and a structured data dictionary and management approach that offers a good foundation for Consumer Duty readiness. By adopting this framework, firms will be able to meet compliance standards and also unlock commercial growth opportunities through deeper insights into customer behaviour, preferences and risk profiles.
Driving growth through data-driven compliance
The ability to analyse real-time client data will also allow organisations to identify underserved customer segments and offer more relevant and tailored products dynamically. AI-driven analytics provide deeper insights into client behaviour, allowing firms to personalise engagement strategies and anticipate potential compliance risks, that is:
- Smarter pricing models that optimise revenue without eroding client trust
- Proactive client management, ensuring clients receive the right support and communications
- Enhanced service delivery, aligning product offerings with actual customer needs
This is particularly important to unlock access for the substantial population and opportunity that is overlooked by traditional wealth management providers, the so called “advice gap”.
Turning compliance into competitive advantage
By embedding AI and predictive analytics into their operating models, organisations can meet the regulatory requirements and also reshape their potential to grow. For instance, while traditional models rely on broad assumptions, AI-driven segmentation will allow firms to fine-tune their value proposition and ensure that clients receive the service and product that reflects their needs at the correct price range.
Similarly, customer engagement can no longer be reactive. With the help of sentiment analytics, wealth managers can detect when clients are confused or dissatisfied, allowing firms to intervene early to help solve any issues they are facing. As data-driven decision-making rapidly becomes the minimum standard, firms that are slow to evolve will struggle to retain clients who expect personalised, transparent and responsive services.
A three-phase strategy for sustainable growth
To ensure that compliance results in commercial growth and success, wealth managers should look to adopt a clear and structured roadmap that consists of the below:
1. Accelerate: Assess current data capabilities, address compliance and data gaps and launch pilot programs that deliver quick wins
2. Deliver: Deploy smart segmentation, establish real-time monitoring for regulatory adherence and embed compliance tracking into day-to-day decision-making
3. Scale: Expand AI- and data-driven insights across the organisation, integrating compliance seamlessly into business strategy and long-term growth plans
The future of wealth management
Companies that view Consumer Duty as a compliance hurdle will miss out on profitable growth and enhance client relationships. Now it is the time for wealth management to evolve and those that embrace a data-driven, AI-enabled approach will emerge stronger and better positioned to serve their clients, grow their businesses and maintain regulatory confidence.
