Matthew Lonsdale
Head of Business Development, Wealth UK
12 August 2021
5 min read
I used to be easily pleased when it comes to books and films, spying, chasing and explosions and I'd be satisfied. There is a line in the 2016 remake of Casino Royale where M, played by Dame Judy Dench, refers to James Bond as outdated and blunt because of his effective but explosive methods. I remember thinking ‘I resemble that remark’ not because any of my actions are Bond-esque but because my genre of enjoyment was blunt.
So I decided to mix up my reading, weaving in some real intelligence amongst the spy craft. Some of the new books I read had a big impact on the way I see the world and the way I think about things, books such as ‘Thinking Fast and Slow’, ‘Nudge’ and ‘I think you’ll find it's a bit more complicated than that’. Others such as Homers ‘Odyssey’ proved too much and I find myself rescued not only by a friendlier version, but also by new tech in the form of Stephen Fry’s Mythos on Audio Book.
But after a few months everything became a struggle, all topics were too heavy. I’d got my ratios wrong, both my ratio of topic and ratio of medium. But happiness returned as soon as I changed the ratios, mixing intelligence gathering with intelligence gatherers and blending audio books and real books.
Unless you have invested properly in the technology it won’t scale efficiently and staff will be left overworked, frustrated and quality of service will eventually suffer
There are a number of traditional ratios in every wealth management firm: the number of clients to advisers, the number of people in the front office, middle office and back office, the number of managers to those managed. Sticking to traditional ratios will leave a business outdated and its profits blunted, but the right ratios will blend commercial success with resiliency and longevity.
The number of clients to advisers is the most obvious ratio to protect. Clients come to wealth managers for high quality advice and service, and with only so many hours in the day it means there is a limit to the number of clients a front office practitioner can support.
But over the last two years we have learned that service can be both high quality and efficient, that clients are not just open minded to, but actively choosing to use portals to seek simple answers, and will self-serve in some areas too. All this creates time for the adviser, and in doing this allows two things. It lets advisers focus on giving advice, and it frees their time, which can then be used to service more clients in a similar way. The impact of technology doesn't stop in the front office, investing in new technology for operational areas makes no sense if the headcount and the processing volume remain the same, and this is where the right ratio will help again.
These efficiencies bring their own balancing acts, if you’re pushing clients towards self-service, they will inevitably feel they are getting less for their money and this has resulted in a downward pressure on fees. In previous years when fees were higher and commissions were commonplace, firms had an ability to increase revenues by increasing portfolio activity. In addition, taking on new clients was far simpler, with less admin, less stringent KYC, and fewer suitability requirements, the cost of a new admin hire could be covered quickly.
Nowadays, fees are lower and more controlled, and while they are linked to portfolio size they have been decoupled from activity, and the paperwork required to onboard a client has increased exponentially. The new hire is harder to justify, with the expectation being that technology should make it easier for existing staff to do more. But unless you have invested properly in the technology it won’t scale efficiently and staff will be left overworked, frustrated and quality of service will eventually suffer.
Much like reading the Odyssey, where you can either read it yourself or automate Stephen Fry to do it for you, wealth managers can (and should) automate the more admin-heavy parts of the job to focus on advice. Importantly it’s not an all or nothing approach - there needs to be a balance between the automated and the human, the spy thrillers and the Proust and Wittgenstein.
Technology is the ultimate double agent, it's going to help improve your business but it needs something in return, and it’s going to improve your clients experience with your business and encourage them to expect something in return.
