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.

There were several trends mentioned in the the report but here are the top four that really spoke to the importance of technology adoption:

Personalisation: This will be key to success and BCG point to the “winners” being the firms that are able to reach each client at the right time with the right offer or advice. They go on to say that “personalising consistently and at scale in these ways will require a 360-degree understanding of the client, superior data analytics, and the ability to move easily between personal and digital channels.”

Understanding clients: Further to the above, wealth management providers need to adopt direct and systematic methods of collecting and analysing client feedback. BCG contend that advisers will need to develop “mechanisms to capture information across the client life cycle, be it from product use, transaction data, risk profiles, meeting reports, or notes about personal circumstances.

Talent acquisition: Change management and the adoption of technology is going to require staff that understand tech. The report recommends that whole-of-wealth providers “attract a broader array of (staff) profiles, including advisers and analysts with expertise in digital offerings, data science, and behavioural economics.”

Data and digital: There is a need for advisers to commit to technology and not treat it as a trial or experiment. There is a wide gap between those confessing that they could not run their business without technology through to those dipping their toe in the water by testing it with a few clients. Recently, that has started to change. In recent times, usage of the myprosperity platform has skyrocketed by 200-300% across various features such as partner logins, digital signing, and assets/liability tracking.

This has confirmed to us that partners are now starting to take the need for digital adoption seriously. As BCG best articulates this challenge, “Don’t experiment. Wealth management providers must fully integrate digital technologies and data into their business and operating models or risk being left behind.”

Earnings season is coming to a close and what a close it’s been. Just today we’ve seen many companies post their full year earnings and the first wave of COVID impacts can start to be seen in the numbers. Small business loan platform Prospa’s losses widened, Afterpay saw a spike in users but is still chasing its maiden profit. The market is as unpredictable as ever.

Here’s what happened this week:

1. Buy now, pay later company Afterpay halved its annual net loss to $19.8m, in a year where heavy investment in geographical expansion saw active customers more than double. More here.

2. Women are the deciders – A new study from Merrill Lynch Wealth shows Married women 45 and younger are twice as likely as older married women to make the financial decisions in their families. More here.

3. Supporting clients through COVID – there’s a great piece by HPH Solutions on how they’ve moved their firm online during these times, build deeper relationships with existing clients and build the practice. “The COVID-19 pandemic has almost been a perfect storm for financial planners. Those that didn’t have a planner were looking for advice and those that had a planner were questioning if they had the right planner to guide them through this event.” More here.

4. 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”.

5. The future of wealth management is a combination of strong relationships and technology – it’s something Chris Ridd discusses in his weekly blog here.

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.

Here’s what you need to know this week: 

1. Advisers may be exiting the industry but demand for financial advice is still strong. Over the three months to June 30, the adviser population dipped to about 21,600 – almost 1200 less than the previous quarter, when their numbers fell by 670, Adviser Ratings figures show. More here.

2. Setting up your firm for success doesn’t just happen – you have to be deliberate about the type of work you take on and how you position yourself. There are some key key questions to ask yourself here so you can set the right value proposition for your firm.

3. Is there more regulation and costs coming for advisors? The Financial Planning Association has expressed concern that together with needing to be registered with ASIC and the Tax Practitioners Board (TPB), advisers may need to be registered with the ACCC. More here.

4. JobKeeper changes – Staff employed by 1 July are now eligible for JobKeeper, an extension from the previous 1 March reference date. More here.

5. A little self care. The connection betwen financial wellbeing and mental health is strong. By looking after your finances, you’re looking after yourself. More here.

There is a strong link between financial and mental health.

A recent survey of more than 2,000 Australian respondents, conducted by Fidelity International, reported that almost half of us would worry about money at least weekly, and one in four at least daily.

A recent Firstlinks article reported, “We have enjoyed more than 25 years of uninterrupted economic growth and Australia has not experienced a recession since 1991.” And quite prophetically went on to say, “At a time when the economic outlook is starting to look more uncertain, only one in five believe they would be financially stable if they were to lose their job tomorrow, with almost three quarters saying they could only manage for a short period or not at all.”

Since the release of the survey our world has become a very different place.

There is no question that the financial situation of the average Australian household has deteriorated significantly, despite the optimism that is reflected in the share market.

Nearly four per cent of the working-age population have lost their jobs since March, and that number accounts for those who are currently on the JobKeeper programme – a further three million people. That equates to about 700,000 jobs and is double what we witnessed back in the last recession of the early 1990s, and four times bigger than in the aftermath of the 2008 GFC.

Probably of most concern, the asset class that we are most obsessed about, property, is showing signs of weakness due to two contributing factors – rising unemployment and declining immigration. Today, there are nearly half-a-million borrowers that have been granted loan deferrals, representing nearly ten per cent of all loans. These figures and current household debt levels lead us to doubt whether government stimuluses and low interest rates are enough to help.

Given these tough economic conditions, the importance of good financial advice to Australian households has never been more critical. Reflecting back to the Firstlinks article, it explains that people receiving financial advice are twice as likely to rate their level of financial wellbeing as high or very high, compared to those who are not receiving advice. Furthermore, 50 per cent of Australians receiving financial advice said their mental health had improved as a result, with 38 per cent reporting that their family life was better.

Often when we think about financial advice, the focus is on investment, risk and retirement, but clearly the linkage to more important aspects of mental and emotional wellbeing need to be considered. The role of the adviser has never been more important in these tough times and perhaps under-appreciated in terms of the positive impact it can have on people’s lives, beyond just wealth creation and risk management./