Asset & Wealth Management
Transformation
The Asset & Wealth Management sector is undergoing a major shift fueled by changing demographics, generational wealth transfer, and digitisation of both its customer base and Capital Markets. Despite electronic trading, true end to end digitisation of the value chain has not happened, leaving considerable friction, cost and a lack of transparency. The Financial Services industry is therefore shifting to a digital finance ecosystem where assets and securities are fully digitised, leveraging big data, analytics, AI and automation to drive new differentiation in analytics, straight through processing and customer engagement.
Digital-first Engagement
Attracting the digital entity
The growing influence of BigTechs has raised the bar for customer service and awareness of digital channels. Digital is now the preferred engagement tool of choice. COIVD-19 has accelerated this.
Asset & Wealth Management has moved to a digital-first model especially in Wealth where robo-advisory (AI based recommendations) is growing. 51% of HNWIs seek self-directed tools and digital capabilities for advice and portfolio management [1].
The human element remains important, 55% of relationship managers say demand is increasing for personalised service and engagement [2]. Firms need to ensure that the human element is properly integrated into the customer journey rather than being an afterthought or point of last resort, this could be via Advice Centres or more likely through remote engagement. 40% of HNWIs say phone or video conferences are their preferred wealth management channels, and only 15% want to go into back into branches or have in-person visits [3]. It is imperative that advisors utilise social media tools to build relationships with existing and prospective clients.
Delivering end-to-end digital experiences will require the integration of networking, cloud, digital workplace, AI & analytics and security.
Digital Platforms
Simpler to buy and serve
Digital Platforms are the core technology that will allow financial services companies to compete long-term. These leverage cloud, AI & analytics and security.
The Digital platform will support the digitisation of products, hybrid engagement, recommendations, data insights and portfolio management. Customers and Relationship Managers will use a digital platform to manage and automate investment management linking directly with capital markets to execute trades and utilising AI & analytics to optimise returns.
Digital platforms also need to support distribution of products via brokers and financial advsers.
A robust cybersecurity system is more critical than ever services become increasingly digitalised and cloud infrastructure migration expands. For example. Morgan Stanley Wealth Management said that some of its customers had their accounts compromised in social engineering attacks [1].
Intelligent Automation
Seamless efficiency
Capital markets are complex with many steps in the value chain leading to increased costs. Many legacy processes and technologies exist.
To improve profitability in a commoditising market players, including Asset & Wealth managers, must automate to compete. This will complement the omnichannel engagement and digital platforms, automating many front and back office processes.
Like banks, Asset & Wealth managers will focus on automation to complement a shift to higher-value human work as a necessity to reduce cost-to-serve and increase resilience. This will include the intelligent automation of simple investment requests and a focus on digitial-assistance for more complex financial arrangements.
Digitisation, robotic process automation and artificial intelligence will work alongside a secure digital workplace supporting hybrid working. Firms will also need to build digital asset technology, including blockchain and DLT, into their infrastructure and digital platforms.
Quantamental Analytics
Differentiated research
The commoditisation of investments through digital platforms means that asset managers need to create differentiation through research that encompasses not only the financial but qualatative information such as strategies or market disruptions.
Investment firms are combining fundamental research with quantitative analysis to combine the value of big data and the expertise of investment managers to identify opportuntites.
This is particular important with the growing importance of ESG investing where information may not be quantative.
Mitigating risk and managing compliance will continue to be critical for investment firms. AI has the potential to leverage an abundance of client data, identifying risks that previously remained hidden. This expanded capability is especially important due to clients’ access to digital investment tools. The resulting volume of complex transactions are more difficult for humans to assess for risk, let alone to assess with the speed required.
Analytics and AI will need to complement the human decision making, this will require cloud storage and compute as well as data management.
Digital Assets
New opportunities
HMWIs are seeking to diversify their portfolios, and 70% of HMWIs globally have invested in digital assets, with cryptocurrencies being the favoured asset [1]. They want advice on everything from cryptocurrencies to indirect crypto investment through exchange-traded funds (EFTs), NFTs, metaverse-related products and digital currency. Though interest may be dampened by recent crypto failures the longer-term trend is likely to continue upwards.
Asset and Wealth management firms need to explore how they expand their portfolio to include digital asset investments. Digital asset management solutions are expected to grow from $4.2 billion in 2022 to $8 billion by 2027 [2].
Firms will also need to build digital asset technology, including blockchain and DLT, into their infrastructure and digital platforms.