Building Digital Capabilities in Wealth Management
Brent Beardsley, senior partner and managing director, discusses how wealth managers can pull ahead in the race to go digital.Watch the video
The growth of global private wealth picked up momentum in 2016, allowing for a good deal of regional variation. All regions experienced positive growth, with North America, Western Europe, Latin America, and the Middle East and Africa posting stronger expansion than in the previous year, and Asia-Pacific, Eastern Europe, and Japan growing at slower rates. Asia-Pacific was nonetheless the most robust region, achieving an increase that was just shy of double digits. We expect sizable growth to continue.
Although wealth managers need to raise their digital games, most have so far pursued digital innovation primarily as a feature selection exercise, centering on what their existing technology can provide along with what competitors and fintechs may intend to offer. Many of their digital launches have been realized opportunistically, stemming from one-off task forces, thus producing basic, largely disconnected, or insufficiently embedded digital capabilities.
In order to make a true step change and leapfrog the competition, wealth managers need to shift their approach to digital technology and design advanced, high-impact client journeys front to back—creating a next-generation, 2.0 version of the client experience. Such a client journey would:
In 2015, the asset management industry recorded its worst performance since the 2008 financial crisis. Growth in assets under management stalled, and net new flows of assets, revenue growth, and revenue margins all fell. Fee pressure on managers continued to rise. Tepid markets and turbulence, which persist in 2016, are today’s reality.
Yet with market-driven asset growth in the rearview mirror, asset managers have an opportunity—and a mandate—to assess the real state of their business and address the step change in capabilities required to prevail when market growth isn’t a given.
As they do so, it will become increasingly clear that competence in advanced data and analytics will define competitive advantage in the industry in the not-too-distant future. Today’s managers face a fundamental and indisputable need to support their investment processes by developing increasingly advanced capabilities in digital technologies. The alternative, for most firms, is to risk becoming irrelevant and to trail their rivals in the ability to generate superior investment returns.