Digital Transformation Now a Must for Wealth Management Firms

The global economy continues to be unpredictable, and the pressure it’s placing on businesses to change their operating models shows no signs of letting up. Wealth management firms are feeling the consequences and are trying to quickly adjust to the new normal. Fortunately for the industry, the convergence of the financial crisis, industry consolidation and changing demographics over a decade ago already required companies to focus on digital transformation and shift toward digital interactions with clients. In response, many firms made great strides in their digital journey by developing a mobile presence and launching robo-advisors and analytics on-demand. As this shift gained momentum across the wider market, firms recognized that wealth management is still a people business; and a hybrid model of digital and traditional forms of transacting emerged as the best way to serve customers that was both operationally efficient and provided a superior customer experience.

With the spread of COVID-19, firms have been reminded again about the importance of replacing manual processes and physical document exchanges between advisors and clients with digital substitutes. The transition can be challenging as companies must meet complex privacy, security, regulatory and compliance requirements. Wealth management firms must rethink how they build and continue to cultivate trust between advisors and clients through increasingly digital means. To date, the shift toward digital interaction provides ample evidence that the hybrid model serves as an effective path forward, as clients prefer to use a low-touch (fully-digital) approach for routine transactions (i.e. initiating payments) and a high-touch (in-person) interaction for key decision making, such as discussing “what-if” scenarios when testing a new investment strategy.

Wealth Management’s New Hybrid Model

The exchange of real-time information via a robust digital interface offering is no longer optional; it’s now essential to conducting business. Firms must strike a balance between using digital channels to enter and test new markets and to reduce the cost of client acquisition, while utilizing physical locations to maintain brand presence and offer a complete customer experience.

Businesses must emphasize the key items below to develop a digital experience that will satisfy both employees and customers alike. 

1. Collaborating with Internal and External Stakeholders
   One of the most key parts of an advisor’s role is their ability to work closely with both clients and other functional groups within the firm (e.g. research and investment strategists). As the wealth management operating model evolves, strong collaboration between advisors and their clients and between advisors and other functional groups in the firm (e.g. research and investment strategists) is critical. Collaboration on portfolio investment reviews and new mandates should be facilitated through video sessions, screen sharing of simulations, virtual conference rooms for group brainstorming and digital whiteboarding ideation. Alert and workflow automation tools must be integrated with accounting and customer relationship management systems. This will allow for the creation of event-driven reminders —such as market events or risk profile tolerances— and work as a catalyst for greater advisor-client interaction.
2. Onboarding: Paper to Digital
   Staying safe during the pandemic means that tools for customer onboarding—including e-signature, document scanning and identification verification—will need to be available virtually while still satisfying rigorous compliance and regulatory requirements. Advisory firms not equipped with such tools could experience asset outflows and revenue loss.
   The good news is research shows that clients value great service and an immediate response to their inquiries, something that digitally native platforms provide by design. A solution framework should:
   - Enable intuitive conversion of paper documents to digital form
   - Capture key information from various document types
   - Validate, authenticate and store this information along with the original document images
   In addition, wealth managers need a robust information lifecycle management system, including policies for secure maintenance and destruction of documents with sensitive client information. 
3. Security and Communication
   COVID-19 has put a strain on all interpersonal relationships, and the wealth management industry is no exception. Advisors have to manage their clients’ intimate life events in a touchless world. As advisors turn to digital channels to facilitate collaboration with their clients, strong digital platforms and a secure channel for managing conversations and digital documents are essential. Zoom’s privacy struggles highlight the challenges of secure video communication, so clients who need to discuss emotionally-charged life events will demand privacy and security. Firms that can demonstrate an appropriate level of empathy and confidence virtually will create positive experiences and win customer trust.
4. Chatbots, Robots and the Digitally-Enhanced Financial Advisor
   Working remotely means that even the most technophobic advisors and clients have been required to become comfortable with their devices. Wealth managers of the future will need to be prepared to integrate automation tools and AI into their activities, whether it’s to improve customer engagement or help make portfolio allocation decisions. Morgan Stanley’s Next Best Action system is a great example. Since the future business model of wealth management is advisory-based, rather than transactional, advisors need tools that can help them guide customers on their investment goals. Broad and simple portfolio allocation decisions are something that robots can do effectively now within reason. Complicated estate and tax planning decisions will most likely require human intervention for some time. Advisors and customers will benefit from a hybrid, AI-augmented financial advisor model for long-term investment goals.
5. Remote and Distributed Workforce
   The wealth management operating model is evolving to allow for distributed front office and operations staff to work remotely. There is no longer a need to keep advisors, operations and technology personnel in one physical location. Fully-integrated platforms coupled with video conferencing capabilities allow advisors to interact in real time with both clients and firm operations staff.  This new setup allows firms access to a better talent pool and greater client coverage.    

Business as usual, but digital

Someday soon the business world will return to a new normal. In-person meetings will not go away, but operations will be forever changed – and everyone will expect to be able to work remotely. Advisors will need a full range of digital tools to easily onboard customers and ensure that they can respond quickly to requests and efficiently manage portfolios. Customers will expect to work with their advisors anytime, anywhere. Only firms prepared to adapt will thrive. All wealth managers, large and small, will need to become digital natives. The transition creates growth opportunities for those who deftly manage the change to efficient and intuitive digital interaction.