The wealth management industry has had to rapidly evolve as customers demand the latest digital solutions. The challenges this presents must be overcome if firms want to future-proof their businesses.
Like every other industry that has been disrupted by digital transformation, the wealth management sector is facing many challenges. Customers expect to receive exactly what they want almost as soon as they ask for it, and this is reflected in their everyday interactions with businesses. Consumer habits are changing, and digital banking is now taken for granted. The wealth management sector was first developed in the early 1900s to distinguish services that were particularly relevant to highnet-worth (HNW) and ultra-high-net-worth (UHNW) investors from mass-market offerings. Wealth management has since spread throughout the financial services industry to become part of many banks’ essential services.
Now, they have been forced to rethink this approach. Historically, markets have recovered in the aftermath of epidemics, but we have to wait and see how the wealth management industry will get through this one.
Another danger facing businesses is the worry that they will lose the human connection with their customers. As digital technologies grow in importance, firms may neglect to recognise the unique role played by their staff. This would be a huge mistake, as employees remain the most important asset to businesses, even in a digital-first industry. On that point, digital technologies will create many difficulties along with the benefits they deliver. The cost, pace of change and logistical challenges of moving from legacy architecture to more innovative solutions are all complicated issues that must be worked through. Organisations may decide that a shift towards cloud computing will help them deliver the wealth management services their customers require without resulting in significant increases in expenditure. If businesses revamp their digital solutions, the desire to gain better access to customer data is likely to be one of the main motivators. Data-driven decision-making is revolutionising the wealth management industry in a multitude of ways, including process automation, customer interaction and risk management. Wealth management firms should note, however, that the use of data is a double-edged sword: while it will allow them to deliver more efficient products and services, it will also create additional risk. According to the 2020 Allianz Risk Barometer, cyber incidents rank as the biggest threat to businesses this year (see Fig 1). Extra security requirements will need to be implemented to ensure this data remains protected.
Currently, it appears that not all wealth managers are taking the threat of data loss and privacy breaches seriously. GlobalData reports that, while 92 percent of mid-sized firms and 78 percent of small businesses cite cybersecurity as a priority, this figure falls to 60 percent for wealth management firms. Stepping away from operational silos is one way firms can mitigate cyber risks, but cultural changes will also prove important. Keeping data secure is not purely a technical challenge; it is also a human one. Staff may need retraining or additional support to ensure they are aware of new security protocols that have been put in place. While digital changes occurring in the wealth management space are profound, they can be adopted without causing undue disruption. Many wealth managers are already in the process of digitally transforming their businesses. Now, working remotely and using digital tools is increasingly looking like the new normal.
We are aware that the implementation of new technologies is often hindered or blocked completely by new regulations, so we have adopted a number of regulatory technology solutions to ensure that we monitor our processes in real time, identify any potential issues and maintain compliance. Despite the huge strides we have made in the digital space, we understand that there is more work to be done. We remain committed to delivering dynamic products that can be adapted to new business trends and futureproofing all our digital banking products. Continuous technological advancement, with the aim of delivering a lower total cost of ownership, remains our ambition. According to a survey by Thomson Reuters and Forbes, 68 percent of wealth managers say learning about and keeping up with new technology is the greatest challenge they face. Wealth managers and financial institutions must re-engineer the way they do business to face growing challenges brought up by endless disruptive innovation.
Know the Market Wealth managers should differentiate between the investment needs of each generation. Millennials are more confident with digital solutions than the generations that preceded them, but Generation Z is the first truly digitally native cohort. Additionally, while younger generations have been drivers of sustainable investment in recent years, the trend is growing across all age groups.
ICS BANKS Wealth Management also offers best-in-class functionality and a host of features to cover customers’ current and future wealth management needs. The utilisation of artificial intelligence and robotics within ICS BANKS Wealth Management enables any financial institution to boost process efficiency and accuracy, both in its internal processes and customer interactions. As a long-standing player in the banking technology industry, the ICS BANKS Wealth Management platform from ICSFS is designed to meet customers’ expectations, increase public confidence in financial services and enable businesses to better understand the services their customers want. Ultimately, this will increase the competitive advantage of financial institutions by reducing the time to market for new products.
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