Reimagining wealth management for the digital age

Reimagining wealth management for the digital age

David Levi looks at why responding to the digital challenge is not just about defence but about shaping a new era of wealth management.

As consumer needs and the financial landscape evolve, major banks are being forced to reconsider their approach to wealth management services. Colonial First State, for example, has predicted that the retirement of Baby Boomers would result in unprecedented transfers of wealth.

Similarly, Citigroup announced its plans to triple the size of its wealth management business in Australia by 2020, as it targets customers with more than $1 million to invest. While the Association of Superannuation Funds of Australia (ASFA) reports that private sector forecasts superannuation assets alone to grow from $2.3 trillion to $3.1 trillion – $3.5 trillion by 2020.

Alongside these financial changes, digital new entrants are entering the market providing consumers with a contemporary way to invest their funds. For example, Australian robo-advisers such as Stockspot, Six Park, Quiet Growth, and Clover provide customers with a statement of advice and exchange traded fund (ETF)-based portfolios along with an efficient signup and financial needs assessment process. Acorns and Plenty are providing consumers the convenience of investing their spare change and First Step helps consumers gain a holistic view of their situation.

Non-traditional players are now moving into the wealth space. For example, in China’s largest e-commerce platform, Alibaba’s funds management service (Yu’ebao) is now the 12th largest Chinese financial institution, managing US$145 billion ($181 billion) in assets.

Using new digital technologies, digital disruptors leveraging open platforms have directly entered the market, with more cost-effective, innovative, and customised solutions. Customer expectations are also being shaped by their experiences in unrelated industries and are willing to switch to obtain the same level of service.

As these emerging technologies continue to enable development and unprecedented disruption, the time has come for banks to consider their digital approach to wealth management in order to secure customer loyalty and ultimately protect market share.

Responding successfully to digital disruption will involve much more than launching a new app. In order to harness the power of digital, banks and wealth managers should follow these four strategies to regain a competitive advantage and achieve key objectives of operational excellence, product leadership and customer intimacy.

 

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Source: Reimagining wealth management for the digital age | Money Management

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