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Reimagining wealth management for the digital age

David Levi looks at why responding to the digital challenge is not just about defence but about shaping a new era of wealth management.

As consumer needs and the financial landscape evolve, major banks are being forced to reconsider their approach to wealth management services. Colonial First State, for example, has predicted that the retirement of Baby Boomers would result in unprecedented transfers of wealth. 

Similarly, Citigroup announced its plans to triple the size of its wealth management business in Australia by 2020, as it targets customers with more than $1 million to invest. While the Association of Superannuation Funds of Australia (ASFA) reports that private sector forecasts superannuation assets alone to grow from $2.3 trillion to $3.1 trillion – $3.5 trillion by 2020.

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Alongside these financial changes, digital new entrants are entering the market providing consumers with a contemporary way to invest their funds. For example, Australian robo-advisers such as Stockspot, Six Park, Quiet Growth, and Clover provide customers with a statement of advice and exchange traded fund (ETF)-based portfolios along with an efficient signup and financial needs assessment process. Acorns and Plenty are providing consumers the convenience of investing their spare change and First Step helps consumers gain a holistic view of their situation. 

Non-traditional players are now moving into the wealth space. For example, in China’s largest e-commerce platform, Alibaba’s funds management service (Yu’ebao) is now the 12th largest Chinese financial institution, managing US$145 billion ($181 billion) in assets.

Using new digital technologies, digital disruptors leveraging open platforms have directly entered the market, with more cost-effective, innovative, and customised solutions. Customer expectations are also being shaped by their experiences in unrelated industries and are willing to switch to obtain the same level of service.

As these emerging technologies continue to enable development and unprecedented disruption, the time has come for banks to consider their digital approach to wealth management in order to secure customer loyalty and ultimately protect market share.

Responding successfully to digital disruption will involve much more than launching a new app. In order to harness the power of digital, banks and wealth managers should follow these four strategies to regain a competitive advantage and achieve key objectives of operational excellence, product leadership and customer intimacy.

 

Be a trusted adviser 

The vast majority of customers do not have an adviser, and if they do, they are less likely to have a regular relationship that would produce real benefits. Digital advisers can build deeper relationships, engage customers more effectively and provide tailored solutions. 

In March this year, brokerage Charles Schwab launched a service that offers a hybrid of automated investment management technology with human advisers. The service provides customers with a financial and investment plan, unlimited access to a human adviser via phone or video conference, and an investment portfolio of ETFs managed by computer algorithms. This hybrid service allows customers to build and maintain a wealth management plan, stay invested and have access to professional guidance throughout. 

Creating digital advisers helps banks address the market demand to make financial planning and advice more accessible. To become a trusted adviser, banks need to build a digital front-end and provide customers with relevant, actionable advice. By helping consumers triangulate advice and education from multiple sources including experts, advisers, phone advisers, robo-advisers, their peers and “people-like-you insights”, banks can democratise advice, provide more transparency and regain consumer trust. 

It’s also important for banks to remain wholly transparent by highlighting, in a simple manner, the risk of any investment.

 

Grow customers’ wealth in a sustainable manner

Banks can manage customers’ wealth by matching the right asset classes and products, suited to their risk profile and accumulation stage, through a simple and intuitive experience. Banks should provide their customers portfolio rebalancing and simple investment options, such as life stage investment options and theme-based investing. 

Motif offers theme-based investing and enables consumers to copy investment portfolios on an open platform that suits their interests, investment beliefs and risk profiles all in one.  Betterment, a pioneering robo-adviser, offers automated portfolio management where clients have access to a clear view of their net worth and a cost-effective avenue to increase their long-term returns.

 

Give customers control 

Digital can empower customers with seamless and intuitive user experiences to drive self-service, transparency and personalisation. By leveraging analytics to curate personalised insights, advice and alerts, digital technologies can help banks create personalised experiences for customers. To equip customers with control in their own wealth management, banks need to provide a single platform where customers can independently view and transact. 

While banks and wealth managers are yet to achieve this single platform, Australian banks are making substantial progress. The ‘Grow’ app by ANZ provides customers a complete view of their finances alongside super, shares, and insurance; granting a bigger picture of their wealth. Recently, Accenture helped NAB build its “Super Sizer” calculator, to help customers discern how their superannuation balance compared to their peers. 

By combining ‘people like you’ analytics and human-centred design principles to provide insight, the calculator removes negative messaging and instead offers proactive suggestions for how customers can catch up to their peers if they are behind. It’s also an effective tool to visualise and action a customer’s retirement plan, which is often a challenge for customers to effectively address. The calculator is another example of a digital tool that is economically viable and provides guidance to customers who normally wouldn’t seek face-to-face guidance from their banks.

 

Connect customers

Banks need to provide connectivity to other like-minded customers in networks where they can interact with investment peer groups to share insights and create business connections. Access to these networks provides customers the ability to learn, validate, and emulate portfolios from peers. Digital technologies can be harnessed by banks to create more enriching social experiences and an ecosystem of exclusive services to enhance customer engagement. 

Fintech leader eToro has pioneered the social trading trend with an online trading platform, giving users across the world the ability to invest their money in other portfolios and granting them access to markets they could not previously enter. Banks can create similar platforms linking similar profiles and communities for clients by using relevant curated content and offerings driven by customer analytics, facilitating financial communication, which in turn benefits the entire trading community.

Digital infrastructure has been the lynchpin for growth across the markets for redefining wealth management. While there is a clear need for financial institutions to leverage digital in order to enhance their wealth management offering, banks cannot lose sight of the goal; to gain and keep customer trust. 

To do this successfully, banks need to implement digital to ensure they are able to provide a tailored experience for customers regardless of their customer lifetime value or net worth. They must also simplify the customer service experience with accessible online platforms and digital tools that give customers the autonomy to manage their wealth.

Responding to the digital challenge isn’t just a defensive imperative. The digital revolution is shaping an entirely new idea of what’s possible in wealth management. It enables exciting new opportunities for banks to drive better client outcomes, engage prospective clients, and build new value. 

By creating a digital business founded on digital processes and channels, banks can provide new client and adviser capabilities, and leverage their scale for immediate financial impact and enhanced end-user experience. 

 

David Levi leads Accenture’s wealth management strategy practice in Australia and New Zealand.

 

 

 

 




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