Recent research conducted by Objectway with senior wealth managers shows that digital services play a critical role in enabling them to achieve their business objectives of growth and scale. Indeed 7/10 firms believe their current state of technology is inefficient and will need to change to meet their business goals over the next 12-18 months. At the same time, the demands of clients have changed significantly during the lockdown and are set to continue as part of the new normal. Digitalisation has now become a major differentiator for them when deciding to remain with or choosing a firm, and as much as 60% are likely to look for another wealth manager if improvements in digital engagement with their firms are not met.

Digital acceleration and adoption of new technology in a changed operating model have been catalysts for increased IT spend this year. A shift in customer preferences for digital channels, along with a focus on lowering operating costs and on new revenue streams, are at the core of these investments

Digital Acceleration Drives Greater Investments

The COVID-19 pandemic caused a major shift in the use of digital tools to reach customers, while customers themselves increased their demand for digital channels and interaction. Naturally, this increase in digital engagement will drive further expenditure.
The marked shift towards digital over the past year has highlighted where processes are not fully digitised: new customer acquisition and onboarding, for instance, remain challenging and will represent key areas of investment as part of a new, effective client lifecycle management strategy.

Responding to the pandemic and determining the next normal, in fact, is still a work-in-progress. Research with senior executives shows that 7/10 firms are either planning or implementing their “new normal” strategy to drive the business forward and only 1/10 have fully implemented it.

How will firms address this?

In order to grow at scale, firms will have to overcome the deeply embedded challenges of an industry which has inefficient IT and Operations. For example, IT costs as a % of revenue vary significantly from approximately 3-30%! The majority of firms are not scalable and are unable to absorb added revenue without adding a greater proportion of cost. Senior executives have stated that digital change will focus on updating/changing legacy systems, automating the front end to improve advisor productivity (and give back more time for value added activities), and ensure improved client communication and overall client experience. There are examples in the market of firms that have achieved very successful outcomes through digital change. On the other hand, firms that stand still will lose out to digitally savvy competitors.

We’ll be discussing these and other useful industry insights at the Goodacre Securities Industry Conference on Friday, October 1st. You can register at this link.