Last week, Objectway hosted a gathering that brought together key thought leaders in the GCC region. Our objective was to embark on a profound exploration of the benchmarks defining best practices in the intricate craft of establishing and expanding a top-tier wealth management business. In both roundtables, we used Objectway Innovation Diamond as a framework to discuss a number of themes in the region, including:

Addressing the evolving needs of a changing and increasingly digital-focused customer base

Everyone agreed that to meet customer needs any business must first and foremost know the needs, intimately and in great detail.

Generic ‘increasingly digital-focused’ is not the required knowledge of needs, it is a self-misleading perception of wealth managers and private bankers or, at best, superficial surveys by agencies and consultants. Wealth managers and private bankers have close and deep relationships with customers and more frequent quality interactions, which generate rich data. This has to be carefully gathered and meticulously assessed using advanced analytics.

The audience agreed with our assertion that ‘digital-focused’ is not a need. Speed and efficiency of service may be a true need; accessible and accurate information may be another true need; a modern product offering, or safety and peace of mind may be further possible needs. These true needs come out of interaction data analysis, and the ‘digital focus’ is a means to an end.

Decoding the digital transformation roadmap for today’s wealth managers and private banks

Every transformational roadmap has a starting point, a destination, and milestones.

It begins with a precise and detailed definition of a current state usually derived from a structured diagnostic assessment. We used our Innovation Diamond as a self-assessment diagnostic tool. The starting point must provide visibility of capabilities, enabling processes and systems, skills and talent, and investment capacity. Defining the target state (transformation goal) can vary and depends on business maturity and ambition levels.

The Innovation Diamond defines 3 key maturity levels: Rationalise (adjust) -> Streamline (evolve) -> Disrupt (stand out). The business leadership must decide if they want to catch up with trends and competitors, or continue evolving, or become the undisputed number one market leader. This, of course, is a balance between (recommended) high ambition, and (cautioned) practical viability.

The defined level for the transformation is also defined in terms of the three Innovation Diamond dimensions: Offering, Configuration, and Experience.

Desired maturity for each of these can be different. Participants were divided in groups to define their own desired target state based on analysis and strategy. One example was: “We want to rationalise our product offering, by enhancing our operating model (configuration) in order to provide market-leading customer experience.”
The difference (gap) between target and current state shapes the roadmap content, and most often the required change is planned and effected in phases, each lasting anywhere from 1 to 18 months, and resulting in a specific milestone.

From our perspective, the phases and milestones would reflect a phased re-platforming (in prioritised steps, because a ‘big bang’ all-at-once change is proven not to work).

Prioritisation takes into account gaps to be filled where the wealth manager or the private bank is behind rivals. For instance, front-office or BO first and achieving the first milestone (implemented solution) triggers the next upgrade.

These are complex decisions and are best responsibly taken in collaborative teamwork with the vendor, as partners in the transformation.

Assessing the impact of wealth-as-a-service and digital challengers on the sector

Despite years of predictions and expectations (including some scaremongering with earlier Robo-advisors hype), digital challengers are yet to make any significant impact in the Private Wealth sector.

They have certainly disrupted and changed the retail sector, being more suitable for the mass consumer segments. Digital wealth management propositions for HNWI and UHNWI are only just emerging and in their embryonic form are addressing the bottom end (‘mass affluent’) of the wealth segments.

A proven barrier to disruption (and countering newcomer challengers) is the rapid adoption by private banks and wealth managers of digital models and enabling technologies.

This is where digital transformation needs to be accelerated or re-done properly. Vendors like Objectway (but not only, of course) have an instrumental role to play in this and the best partnerships are adopting methods and tools even superior to those offered by the challengers.

Another proven defence against challengers is creating the bank’s own subsidiary (“If you can’t beat them then join them”) or, for a shortcut, acquiring a successful or promising challenger (“If you can’t beat them then buy them”).

WaaS (Wealth-as-a-Service) is a niche adaptation of already popular PaaS (platform), BPaaS (business process) and BaaS (bank). Similar to those models, Wealth Management benefits from outsourcing more than technology (as in the SaaS model), also relying on better operational efficiency to assign much of operations to a better equipped and more efficient entity, focusing on proposition and, not least, on customer relationships and experience.

A new breed of service providers is just emerging, offering white-labelled propositions (originating from either early adopter institutions, or successful vendors) and they have the potential to optimise the difficult cost-income ratio and allow faster and better scaling.

Private bank leaders forecast trends and disruptions shaping the future landscape

Using the OW Diamond as a ‘crystal ball’, we helped the audience to predict some likely developments in the three key dimensions:

Innovation in offerings will continue to diversify asset classes and investment ‘food chain’ models. Such innovations will address the imminent massive wealth transfer to the next generation whose true needs are yet to be understood and acted upon (see topic 1 above).

Alternative assets will grow and diversify, one already visible trend being how private markets are entering traditional private wealth space.

Operating model (configuration) developments will see even more BPaaS, BaaS, WaaS and new, yet to be developed models. This will be catalysed by the AI explosion, whereby intelligent automation brings both quantitative benefits (of efficiency, speed, cost reduction) and qualitative changes, including possible disruptions of established processes, organisation structures, people roles and entire institutions.

Customer Experience is already the ‘next frontier’ for improvement and competition, but in coming years it will become a prime differentiator, also largely driven by cross-generation transfers of wealth and (like all above areas) by advancements in AI.

Interesting times!