Can hybrid technology keep us out of a wealth management crisis?

The wealth management arena of banking technology is going through a huge change process. The rise of technology is affecting how clients want to interface with their advisors and the overall level of expectations is rising vastly. So can banks find a clear solution and a way forward?

Senior Editor Bill Boyle


he march of robo-advisors and the transfer of a huge tranche of wealth to younger generations, particularly in the US, are only a few of the trends the industry is facing; hence the industry

needs to rethink how it does business. No industry is spared failure but in the future, failure is something this industry cannot afford.

For an industry grappling with such a seemingly niche problem as managing wealth, many of the tech firms in this space seem to have little idea of how to grow – much of the tech landscape is cluttered with small niche players, each one dealing with a small portion of the overall wealth management problem. There are few industry-wide players and they are all suffering the same problems.

This has left investors and advisors both aimlessly seeking a clear solution and way forward.

If present-day wealth management firms want to really be ahead of the game, they must start building in transparency, less opaque practices, more streamlining and simplification, better communications methods across their teams and more empathy. Particularly empathy.

To be positive they need to consider embracing courses such as increased transparency, simplification of the industry, effective communication methods for cross-functional teams and emotional intelligence, which are beginning to shape the financial services world. The traditional small family office, which has been the method to handle and cosset the super-rich until recently will continue to deal with billionaires with kid gloves.

However, we are entering new waters and our new entrepreneurs don’t expect the revered treatment that billionaires get – but there are so many of them being created at present that they will need more than robo-advisors to help them manage their finances while the family office remains out of reach.

The new breed of entrepreneurs are creating entities that allow individual CPAs and financial advisors to replicate the family office at a lower level and allow them to service high-net-worth individuals seeking personal pampering but not the outrageous costs of the ultra- wealthy. Companies such as PeachCap have grown up by streamlining their back-office support and providing their financial advisors with the tools to manage more complex tax calculations, accounting and wealth management strategies, top-shelf financial and tax services.

The key job they have to tackle is democratising the family office for wealthy Americans. These developments are happening as private banks are ceasing to manage low-level millionaires. JP Morgan Chase’s private bank announced a while ago that it was raising its minimum level asset class from $5m to $10m. That trend is now developing across the board as banks cannot handle the volume of new ‘single digit’ millionaires – and that is just in the US.

New developments in banking technology are making almost every aspect of people’s lives faster, easier and more connected, particularly the large-scale adoption of mobile for banking. This is something wealth management will begin to implement. Billionaires are now able to hunt out the ‘Rolls Royce of financial services’ for their wealth management needs. And they want to harness technology to make intelligent, independent decisions.

Wealth managers have to accept that consumers now expect technology to handle some of the basic, more boring aspects of even wealth management. This would probably stretch to items such as account setup and management, and asset allocation strategy because it is still a large part of what has led to the surge in robo-advisors and related technical developments.

While the human aspect to wealth management isn’t going away anytime soon, firms need to embrace digitisation even if the only reason | © IBS Intelligence 2018

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