The pandemic has witnessed an impressive uptake of digital engagement from clients. Research form Oliver-Wyman’s world wealth report 2020 shows a 7-10 fold increase in client engagement across all digital channels and this is set to remain as part and parcel of the new normal.
However, UK wealth management clients want to see improvements across a range of digital touchpoints.

For example, over 40% of clients want to see a significant or very significant improvement in areas such as onboarding, client portal, reporting, and will consider leaving if these improvements are not made. Interestingly, 75% of clients pointed out that improvements in technology would make them want to interact face to face with their wealth manager even more. This is a clear and stark warning for firms who do not make the necessary changes as they will risk losing out on greater face to face engagement with their clients, and/or risk losing their clients altogether to more digitally savvy firms.

IT and Operations, two key elements of a firm’s efficiency and significantly impacting the client experience, are also firmly under the microscope for wealth management firms. Compeer’s most recent benchmarking data showed that IT spending in the sector has increased year on year for the past 5 years and the range in IT costs as a % of revenue varies significantly from under 6% to above 20%. In general, firms are not achieving ‘bang for their buck’ as increased IT spend correlates to lower profitability with the optimum IT spend being below 10%

The sector is also still characterized by inefficient operations mainly due to legacy IT architecture whose components do not communicate effectively. This has led to many integration layers and manual work arounds over time which are inefficient, time consuming and error prone. This also provides a significant challenge during times of change such as regulatory and/or a new product/service offering. As a result, firms are having to spend the majority of their resources on just keeping up with business as usual and innovation to meet client needs has had to take a firm back seat.

Indeed, due to the inefficiencies in the sector, 7/10 firms are not scalable. This number would be even higher if we looked at firms who have achieved scale over the past 5 years.

How can firms make the most of digital change and what is possible?

7/10 firms were intending to review their IT over the next 12-36 months pre pandemic. The pace of this change has now accelerated due to Covid-19 and other factors such as ESG. Wealth management firms are fully aware of their current inefficiencies and the impact these have on the business and their ability to serve more demanding clients with higher digital expectations.

There is undoubtedly a great task at hand but also the potential for major rewards. Firms must prioritise what they fix first and one of the challenges is to manage this within an overall change programme with a clear idea of expected risk and return over time.

In a recent case study the impact of digital change transformed the client experience and improved business metrics dramatically. The firm managed its digital change over three phases and implemented an innovative Portfolio management solution designed to monitor client preferences, rebalance in real time and make use of AI, an investor portal designed to enhance the client experience and provide on demand access and a client lifecycle management solution to streamline onboarding and monitor ongoing suitability. The results achieved were certainly eye catching.

For example the firm was able to attract more clients, improving their satisfaction rate significantly and increasing the advisor’s capacity by 25% and AUM by more than 25% within 3 years of the start of a phased digital change programme.
Clearly there is lots of potential for the sector to continue attracting clients and growing more efficiently at scale. Digital change can go along way to enabling this.