Wealth is changing. No, wealth has changed. Captains of industry, nobility and financiers are no longer the prime owners of wealth. A record 71 of the Forbes 2019 rich list were under 40 and amassed their wealth from companies like Stripe, Juul, Facebook and Snap. And yet, to many potential clients, advisors have not changed. The perception is of a paper-based, face-to-face culture, rooted in the image of the advisor from decades ago. This image is simply not true. The ranks of City Wire’s 30 under 30 are filled with senior professionals in established advisory firms and not one of them conforms to the envisioned 60-something, besuited city gent stereotype.
With the change in demographic has come a change in relationship model. The use of digital tools is prevalent - video calls are an everyday part of an adviser’s life, many monthly statements are electronic and self-service is an increasingly important delivery channel. This is not just through client demand - firms understand the efficiencies brought by digitisation. Technology has the capability to make advisors more efficient without impinging on relationships. Technology, which has been instrumental in bringing people closer together, now brings these same efficiencies to wealth management.
It’s not about replacing the advisor; far from it. In the same way that Zoom, Skype or FaceTime bring a new dimension to phone calls, so can technology add to the advisor/client relationship. Portal services can reduce printing and speed up dissemination of documents through online sharing. Using video conferencing can reduce or eliminate the need for travel, allow reviews to take place regardless of location and for more frequent contact. Self-service options allow clients to manage their own accounts when advice is not needed, and frees up advisors’ time to provide advice when it is. Integrated systems provide a holistic view of the client, and can reduce risk as well as providing new opportunities.
Clearly in the current climate these digital tools are more important than ever and the industry has made great strides towards a fully integrated digital strategy. Yet there is still some way to go. Taking the retail market as an example, services like Nutmeg, Robin Hood and Acorns all offer services that are fully digital - from onboarding to portfolio allocation to reporting - and while personal relationships and comprehensive advice remain essential in the private wealth space, some of the innovations seen here need to filter upwards.
Digital services depend in no small part on the quality of information fed into them. Low quality, delayed information cannot offer a solid base for digital services. Even high-quality information that is significantly delayed will result in a sub-par experience when today’s client demands real-time, accurate valuations and pricing. However the majority of private wealth managers do not operate on a real-time pricing basis. Much information is supplied end of day, and while true, real-time pricing may be prohibited by cost, 15 or 20 minute delayed data is readily available.
When clients are used to on-demand access to everything else in their lives, why are some in wealth still operating on yesterday’s business model?
This situation means that there is opportunity for firms to develop a competitive advantage through their data strategy. While emerging start-ups in the FinTech and WealthTech space have begun providing data with less of a delay, the fact that they are start-ups may instill a lack of confidence in some potential clients. Established wealth management firms - while having the pedigree and proven business model - may lack the agility, usability and user experience of the start ups. Marrying the best of both worlds will create firms that can truly service the needs of the new model client.
