November 06, 2023
Tech-Driven Evolution and Challenges in Wealth Management: Happening Today, Impacting Tomorrow
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Gartner report Top 10 Technology Trends for Wealth Management in 2023 recommends that Chief Information Officers (CIOs) leverage emerging technology trends to optimize their operations for the present and innovate for the future. Three critical categories are outlined for consideration:
According to Gartner, the trends are grouped into three categories:
Adopt: More immediate and represent technology that is mature and has mainstream adoption. These technologies should be purchased and deployed in all affected business units to keep a competitive advantage or drive and support digital transformation.
Trial: First proof-of-concept initiatives. These technologies should be tested or underway in select business units that would be affected the most. Whether they succeed or fail, these technologies will provide insight into potential business impacts and into whether they should be expanded across the organization.
Assess: Emerging technology trends that should be evaluated with the R&D and innovation teams, since they may not be fully mature in the wealth management industry. The firm should assess these trends given their potential transformational impact.
Category #1: Adopt – Implementing Established Solutions
One notable innovation within this category is the emergence of all-in-one advisor desktop platforms. According to Gartner
Gartner lays down the following top five areas where wealth management CIOs anticipate hyperscale cloud services will have an impact:
- Improve quality and operational excellence (44%)
- Increase cost-efficiency (44%)
- Ensure business continuity (42%)
- Improve speed to market (39%)
- Increase innovation (35%)
For several years, wealth management firms have migrated some applications to the cloud (e.g., CRM, financial planning, portfolio management). They are now looking to move core accounting platforms, workflows and a much larger percentage of IT functionality into public clouds at a faster pace to improve operational excellence and increase cost-efficiency.
On the backdrop of it all, the wealth management industry is increasingly focusing on ESG and CSR investing.
but further adds,
To address this shift, Gartner recommends the following actions:
- Work with your compliance and risk teams to identify and address evolving regulatory standards around your firm’s and advisors’ fiduciary responsibilities.
- Work with advisors and their teams to develop a standardized process to capture clients’ ESG preferences included in their investment policy statements.
Last but surely not least, Chief Information Officers in wealth management are increasingly focused on harnessing the potential of AI to enhance the customer experience and drive innovation. Establishing an AI Center of Excellence serves as a hub for collecting and centralizing AI expertise, simplifying the creation of an enterprise-wide AI strategy, encompassing use cases, deployment plans, and governance.
Category #2: Trial – Exploring Innovative Technologies
First on the list, low-code development technologies offer an offer an exciting opportunity to connect your firm with clients in a unique way. According to Gartner
Rather than a technical coding environment, low-code operates in a model-driven, drag-and-drop interface. This setup enables users without a technical background to participate in the app development process. By incorporating drag-and-drop capabilities and intuitive visual user interfaces, low-code increases productivity for traditional software developers.
Low-code capabilities are long-term trends in software, accelerated by SaaS, APIs and cloud technologies. The democratization of development and delivery is further fueling this shift. Business functions need to be more agile and adaptive through owning their own technology, data and analytics creation.
Using low-code development technologies can enable wealth management firms to create unique and personalized client experiences by developing client-facing applications and solutions internally rather than outsourcing.
Also
Low-code development technologies can increase wealth management firms’ ability to develop and deliver new products.
Generational shifts in the client base have introduced complexity in managing diverse expectations across various age groups. To address this challenge, many organizations are embracing business-driven hyperautomation.
Hyperautomation involves the orchestrated use of multiple technologies, tools or platforms to achieve business results. These solutions include, but are not limited to, AI, ML, event-driven software architecture, robotic process automation (RPA), integrated platform as a service and process/task automation tools, explains Gartner.
By adopting hyperautomation, CIOs can empower clients to handle routine tasks independently, mitigating the impact of talent shortages. Additionally, according to Gartner:
Hyperautomation can increase advisors’ capacity without reducing profitability. This approach can also give wealth management firms greater ability to upskill and nurture advisor talent, which is critical in light of current talent scarcity, especially in the apprenticeship model that many wealth management firms follow.
Category #3: Assess – Navigating Emerging Technologies
The emergence of advanced AI models such as GPT-4 and Dall-E 2 has been a focal point of interest. As reported by Gartner,
Models such as GPT-4 and Dall-E 2 have garnered the attention of wealth management executives as well as vendors, who see the potential for these models to augment human intelligence and create innovative insights that will redefine the wealth management industry’s value proposition.
It further states an implication
Foundation models pose significant risks, such as downstream bias, “hallucinations” (making up facts) and toxicity, unclear legal indemnification, broader risks around potential misuse, and concentrating power in a few large technology companies.
A fundamental understanding in this context is that
Emerging AI capabilities are not stand-alone tools and are best thought of as a means to augment and potentially improve human capabilities, says Gartner.
It adds
AI models can be unreliable; nevertheless, there is significant potential to use these tools to enable wealth advisors to have more meaningful conversations with their clients by developing insights across more sources, information and client data.
Keeping up with personalization requests,
Today, IoT is an enabler and accelerator for digital transformation of enterprises. IoT, through assets with embedded technology to communicate and sense/interact with their internal states or external environment, enables enterprises to improve business processes and enhance decisions with real-time information, articulates Gartner.
As clients progressively integrate smart devices into various facets of their lives, the data generated by these devices can be harnessed to offer hyper-personalized and contextualized solutions.
Recent concerns around fiat currencies, inflation, supply chain disruption and the potentially precarious state of banking have once again called attention to cryptocurrencies as a viable alternative asset class. Investors, especially younger clients, increasingly view cryptocurrencies as a viable asset class for potential returns and diversification, says Gartner.
However
Regulation, not demand, will determine the degree to which wealth management organizations will support cryptocurrencies in client accounts. Most wealth management firms are reluctant to support individuals’ investment in cryptocurrencies given their volatility and lack of transparency in many of the exchanges.
Gartner suggest
Working with the investment management and compliance teams to outline and understand the challenges associated with supporting this asset class, along with monitoring the evolution of compliance and regulatory requirements for fiduciaries allocating crypto assets to client accounts.
Much more is explored in the @Gartner® report Top 10 Technology Trends for Wealth Management in 2023.
Get immediate access to the Gartner® report! Objectway offers you a complimentary copy.
Gartner, Top 10 Technology Trends for Wealth Management in 2023, Chuck Thomas, 23 June 2023.
GARTNER is a registered trademark and service mark of Gartner, Inc. and/or its affiliates in the U.S. and internationally and is used herein with permission. All rights reserved.
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