COVID-19 is accelerating the adoption of technology across the whole-of-wealth industry, but even before the global pandemic hit there were already systemic changes underway and Boston Consulting Group (BCG) makes a strong case for that in this insightful 32-page report, The Future of Wealth Management – A CEO Agenda.
The report presents a common theme: at the core of challenges faced by the industry is the impact digital technologies are having on lowering entry barriers, resulting in increased competition, and commoditisation of services that were previously differentiated. So we can expect to see large wealth management providers increase market share due to scale advantages, and smaller niche or boutique firms will thrive as they charge a premium for their specialised expertise. And it’s those in the middle that will get squeezed out, BCG predicts.
I could go on about some of the challenges faced by wealth managers but I would prefer to look at the opportunities presented by technology which are well documented in this report, and best summarised by this statement: “The paradox of an information-rich society will be the poverty of time available to make sense of all the information on hand.”
At myprosperity we have always urged that software should do the heavy lifting for advisers. Whether that is collecting data, engaging clients digitally, better understanding clients at scale, identifying opportunities, etc. BCG affirms, “The ability to derive client-specific insights and act on them swiftly will separate the best firms from the rest.”
What is also covered in the report is the changing nature of the client demographic, as many Gen-X’s move into retirement and the client base rapidly grows to the Gen-Y and Gen-Z demographic. As we know, this is a cohort of clients that have heightened expectations when it comes to technology. After all, they are the first “always-on” generation. BCG asserts that “the clients of tomorrow will simply not accept working with a wealth management provider that does not have top digital capabilities to let them access what they need at any time they want.”
The good news is that human interaction and personal relationships still count. We have seen efforts by new fintech players moving to disrupt the industry with robo advice, machine learning and AI enabled insights. BCG assert that “trust” will remain essential, and argue that digital solutions alone will not be sufficient to establish trust. We agree the combination of great tech with good advisers is the formula for success.