It needs to get personal! At least, that is one of the key demands of wealth management clients, which translates into a key requirement for WealthTech providers

The world got richer in 2021, well some of it did! However, it seems unlikely that this will have been the case in H1 2022 thanks to what are now the ‘usual suspects’ (inflation, supply chain issues, energy prices, etc.). Nevertheless, according to Capgemini’s World Wealth Report the global High Net Worth Individual (HNWI) population grew 7.8% and this cohort’s absolute wealth grew 8% in 2021. The report also suggests that the growth gap across wealth bands is shrinking, indicating a more level playing field, due to improved information access for investors and democratisation of asset classes – factors for which the spread of WealthTech has been partly responsible.

For those in the wealth management sector, food for thought will also have been provided by evolving demographics. To take just one point, women across all wealth brackets are set to inherit 70% of global wealth over the next two generations. They will be seeking firms that not only provide fee transparency and data security, but also education in how to grow this wealth. At the same time, the sector is undergoing a diversification of investment options, from sustainable investing to the growing prevalence of digital assets.

Wealth management for the mass affluent

Broadening the focus from HNWIs, technology, notably implementation of robo-advisors has extended wealth management solutions into the mass affluent market around the world. Data from Statista suggests assets under management in the robo-advisor segment in the US alone are projected to be $1.16 trillion in 2022, with forecast CAGR of 14.3% through to 2026.

In a report entitled How will you reframe the future of advice if today’s client is changing? EY suggested that: “The global market for wealth advice is poised for transformation. The new paradigms for advice will redefine client experiences across the wealth continuum while reducing cost to serve.”

EY said that wealth managers and private banks will use ‘a seamless blend of people and technology to deliver wholly personalised advice that enhances clients’ lives’. Among the report’s conclusions: “Technology will clearly be a critical area of focus, but it must always serve strategy and should be integrated with human talent in a seamless, synergetic way.”

What the tech providers think

Dr. Alexander Cassar, Chief Business Operation Officer at Objectway, noted: “According to Forecasting the future: technology and investment in Wealth Management, commissioned by Objectway, the wealth management industry is expected to undergo an unprecedented amount of digital change initiatives over the coming 12 months, with the majority of firms intending to change at least part of their IT architecture.

What does the future hold for WealthTech?

Tackling legacy technology is also key for Dr. Cassar of Objectway: “In the near future the priority on top of the agenda is legacy technology. Firms are trying to simplify their IT and ‘future proof’ the business for prospective integrations in an open platform architecture in case they offer new products and solutions without the need for a complex overhaul of systems and without the need for many manual interventions.

“Closely after legacy comes the push for straight-through digital onboarding, driven by the need to remove inefficiencies for relationship managers and to provide better client digital services. As client demands have changed, their digital experience is now a real differentiator between firms. A personalised experience is seen as a reason to stay with or choose another firm by at least 60% of clients.”

Dr. Cassar added: “There is also a focus on improving digital channels to offer a personalised experience to clients where they can access tailored information at any time on any device, as well as having secure messaging, chat, video, to collaborate with their advisors. Client suitability is seen as another area that requires digital change, as firms want to be able to offer real-time risk alerts and rebalancing to ensure client mandates are met effectively and the ESG dimension is incorporated to client risk profiles.”