Digital vs Traditional Wealth Management: Insights for Firms

Time marches on and with that steady beat of change, wealth is transferred to younger generations as they build their own assets. And they are mobile device users, with 93% of them owning smartphones. What’s more, the older generations that have been clients for a while are not ignoring technological change—they are adopting online and mobile tools as a means of understanding and managing their financial health. Customers’ interactions with their financial advisors are moving to digital, driven by the expectations of clients as well as the efficiencies realized by firms who automate their processes digitally.

The digital transformation of fintech sweeping across financial institutions from online banking to corporate financial management is an opportunity for firms of all sizes to increase their efficiency. And the pressure on asset managers is growing. A 2018 Bain & Co study found that:

Customers are moving to passive investments.
New regulations will increase costs.
Downward pressures on fees will decrease profit.

They predict that “a collapse of plain-vanilla, smaller or mid-sized firms with no competitive advantage… is a highly likely scenario.”

What is your financial planning firm doing to create a competitive advantage? The need for digital technologies is a chance to differentiate yourself in the market with better tools that meet or exceed your clients’ digital expectations. Smaller firms have the advantage of understanding their customers better, can make decisions sooner, and can execute initiatives faster.

With planning, the right partners, and a focus on customer’s needs, mid-sized firms have an opportunity to nimbly deliver digital wealth management services while larger companies are still blundering forward with generic solutions. As you plan your firm’s digital finance strategy, here are a few things you should know; these are the lessons we have learned assisting other companies with their projects.

Five suggestions to leverage what mid-sized traditional wealth management firms do best, customer experience

Why do your customers count on your company to manage their wealth? For most firms, it is the positive relationships clients have with your employees, the products you offer, and the level of service you provide. The customer experience. These are all differentiators that should become part of your digital transformation plan. Customer experience matters and a survey by BDO recently uncovered that digital transformation benefits customer experience by leveraging data-driven insights, enabling engagement with new customers, providing a way to compete for existing customers, and streamlining processes.

Consider these five suggestions to make a difference with the customer-facing portions of your digital platform:

Build the trust and experience you offer now into your digital platform.

Your clients have made a conscious choice to entrust their assets to your company and your employees. Use surveys and interviews to understand what attracted them and keeps them. Then include those strengths and differentiators into the design of your new platform.

Make it easier for clients to interact with the people they trust in your organization.

A crucial part of your current success is the trust your clients have with your financial advisors and administrative staff. Trust is the most important asset for wealth management firms. Digitization should automate the tasks that don’t require experienced advisors and free those advisors up to do what automation and artificial intelligence algorithms can’t do: build relationships and understanding with clients.

Stay nimble, updating capabilities and adding features frequently.

The initial release of a digital platform is just the start. Leverage the flexibility available in a mid-sized wealth management firm and continue to improve the tools you offer. Add new features to take advantage of improvements in mobile devices. Keep your eye on digital assistants like Alexa, Cortana, Siri, and Google Assistant. Stay up-to-date with the technology and changes in the wealth management industry.

Provide a variety of value-added services through your digital platform.

Customers want to do more than review their balance and place buy or sell orders. Take what you know about where you traditionally added value and include it in your online solutions. Look at what your competitors are offering and include those services as well.

Give clients actionable data to guide their decision making.

One of the most powerful features of a digital platform for wealth management is giving clients real-time access to financial data: where the assets currently are and what markets are doing as they change and shift. Work to convert that raw information into actionable data that will allow them to make smarter decisions faster. Real-time access to data can also enable new technologies, more informed risk management, and insight into new opportunities.

Five suggestions to integrate and automate your traditional financial management processes

You have a successful business now, providing financial services to your customers. You must be doing some things right with your traditional processes. Transitioning your firm to be a digital wealth management company should be based on what you have learned in the past. Not just what to transform, but also what to abandon when you make the shift. In their whitepaper on digital transformation, EY makes it very clear that when developing an end-to-end digital strategy, companies “must decide whether they can enhance or transform their existing models, or whether they need to invent a new model.” We could not agree more.

Over the years we have helped a variety of companies in the financial space with their digital strategy, and have developed the following five suggestions to improve on the advantages you have now, and to identify and leave behind what in your business model is holding your firm back:

Map your processes and the flow of information.

Understand how your employees do their job and how your customers access your services today. Our customer journey mapping process is a good place to start. Make sure you capture not just what people do but also what information moves through those processes.

Take the time to identify user frustration and manual steps.

No matter how good your people and processes are now, there will be areas that generate frustration with employees and clients. There will also be steps where humans are manually creating, entering, or extracting information. Identify these pain points and work with your development team to eliminate them. If spreadsheets are being used, identify what they do and replace them with integrated tools or reports.

Invest in changing the mindset of your users.

Changing the technology behind a process does not change the process itself. Investing in modifying the expectations and habits of your clients and employees is critical to a successful digital transformation. Use marketing, informal training, and the relationship your advisors have with your clients to get everyone on board with the new, better way of managing their wealth afforded by your new digital platform.

Focus on connecting data across your enterprise.

The efficiencies for your firm created by digitization of your processes often come from the integration of your company’s datasets. Leverage the big data you have in silos now. Your client management tools should be part of a comprehensive enterprise resource planning, or ERP, system that integrates data from accounting, customer support, IT, sales, marketing, and whatever other solutions you use.

Digitize the complete customer journey.

Clients expect the ability to do everything they want to do from their preferred device. They should never have to stop mid-transaction and call someone in your support center or wait for something to be mailed to them. Their entire journey should be digitized.

Stand out in the crowd: Evolve your culture and make your digital transformation a competitive advantage

Change is never easy and always costs time and money. Taking on a transformation from a traditional wealth management firm with a hodge-podge of online tools to a digital customer-centric organization can be both a challenge and an opportunity. Companies that embrace the opportunity and plan for the challenge will grow and prosper. Those that stay with what worked in the past will be left in the past.

To maximize the positive impact of digital transformation, invest in shifting your company culture towards this new way of doing business. Involve the entire organization, not just IT. IT can implement the software, but they don’t understand client needs and they can’t change how you do business. Culture change also includes educating clients on the new technology, new workflows, and advantages afforded by new tools and processes.

Digital transformation also means creating the tools that integrate and digitize your data and move your customer interaction onto a computer or smartphone. Creating that competitive advantage with solutions that truly differentiate your company requires a team that understands how to transition from traditional to digital. You need a team that can manage a large project, gather information from across your organization, identify what makes your offering special, and turn everything into an experience that delights your customers and enables your employees. And, most importantly, support you as you add users and continuously improve your digital experience.At Zibtek, we have the experience and proven processes to transform your business into the digital age. With our focus on small and medium enterprises, we provide a full solution including design, strategy, software development, and support. Reach out to our team for a free consultation and let’s work together on making your digital transformation a competitive advantage.