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CHAPTER 4
The Future of Data in Wealth Management
It’s ironic that the year most associated with vision, 2020, is the year that nobody saw coming. There is a retrospective insight there to be made, but now is not the time for it.
Instead, let’s concentrate on what we do know, and what we can affect.
In Wealth Management, taking COVID-19 to one side, the last few years have been ones of change. Financial services on the whole has seen a welcomed increase in the diversity and expectations of new clientele, and Wealth Management is no different.
Macro trends, from the political landscape to technological advancements are changing Financial Services. AI is one of these driving industry trends. Make no bones about it, the next few years, as we begin to enter a transfer of wealth inflection point, are crucial to building a future that works both for the Wealth Manager and their client base. Now is the time that wealth managers need to sit up and take notice of these changes and trends and form a coherent strategy on how to retain and attract customers in the future.
There is no time for shortsightedness.
“This is a people and data transformational change that will alter the scope of what Wealth Management is, what it offers and who it services”
Orbium
In contrast to COVID-19 - this is something that both ourselves and C-level executives within Wealth Management have foreseen. In a survey conducted by Orbium where C-level executives from 50 Wealth Management and Private Banking firms were interviewed, there were 6 key industry megatrends identified that will shape winners and losers in the industry for the next 5 years and beyond.
Of the 6 industry megatrends identified, 3 of these centered around personalisation or personal data. Trends towards hyper personalisation, a shift from support to value generation enabled through technology and the paradox of personal data are all crucial to driving ‘the evolution of holistic personal wealth needs’. With 34% Assets under Management ($1.5trn p.a.) expected to be lost as a result of the new generation’s shifting ethical and personal values, has there been a more important time in this industry’s life to fully understand the new customer base? (Source: Accenture – Orbium Wealth Management C-Level Survey 2020).
Foresight and adoption are two very different things however and technology will be an important part of defining winners and losers over this important next period. However truly getting to grips with the Wealth Manager’s current and future client base is key to servicing them in a way that both the Wealth Manager and the client can understand and build upon.
Orbium notes that traditional products and solutions are becoming less relevant, only demonstrating further the need to be able to drive innovation and change at a rate that keeps up with the client whilst fully adhering to current and future regulation.
Whenever we look back at technological innovation and adoption through the benefit of hindsight we often wonder how incumbents managed to miss the elephant in the room - how the great ice cutting industry of the 1800s missed the emergence of refrigerator technology or how traditional booksellers missed the platformitisation potential of Amazon in the late 1900s for instance.
However, while hindsight may give us the benefit of the bigger picture, it is less able to show us the ‘on the ground’ picture of the time. For example, how ice cutters made full use of modern (for the time) logistics technology to double-down on their business model and maintain high profitability, and how Waterstones made the strategic decision to become part of HMV Group to extend its brand exposure.
At the time when it happens, the elephant in the room is merely the shadow of an elephant, yet to fully emerge.
These are lessons that Wealth Management needs to be mindful of as data-powered technology breaks down silos of entrenched business models.
A customer-led future
“As Wealth Managers look at the type of individuals they have typically tried to attract, these new young entrepreneurial demographics are going to be much more concerned around the sustainability agenda…hence diversifying current products and services offered because of the transparency required from these new demographics”
– Chris Low, Managing Director, Accenture Wealth and Asset Management Practice
This is a people and data transformational change that will alter the scope of what Wealth Management is, what it offers and who it services.
Traditionally data has not been at the forefront of decision-making around clients, with the focus on data to support high returns ensuring client data takes a backseat in prioritisation and effort. However, this is changing. More and more Wealth Managers are beginning to understand the potential value that is locked up within their data. The question now becomes - ‘How do we realise this potential as the shadow of the elephant grows larger?’Beginning the data journey
“It’s a long journey that they’re going to go on and I don’t think it’ll ever be complete because market demand and preferences are changing so fast...getting their Data Governance and Strategy correct will enable Wealth Managers to accelerate their journey much faster” –
Chris Low, Managing Director, Accenture Wealth and Asset Management Practice
Embarking on this journey of unleashing the potential of data cannot be made alone. The time to change is right now and Wealth Managers at their core still need to focus on what makes them so great - the unparalleled client servicing and relationship building capability. However, they should also bridge the gap between the future and today through accelerated partnerships with specialist firms to maintain business as usual and not cause disruption to current clientele.
As a result of these increased expectations both from the new client base and from a digitally native workforce, data foundations need to be understood and laid down with thought. This should happen before the workforce or platform itself is ready to move into the advanced analytics capabilities that will set the winners and losers apart. Conversations and outputs around how these platforms work holistically for the business are key to ensuring the right choice for the Wealth Manager. Data can no longer be a siloed part of the business, it is everyone's responsibility to maintain data from a regulatory and reputational standpoint. Let’s be clear here, the march towards an AI enabled industry has begun and there will be winners and losers in the race towards data-driven adoption.
The positive news is that the groundwork of data and AI adoption has already been laid, and adoption has proven via business cases throughout Financial Services (link to insurance). Bringing data up to speed therefore should not be seen as new territory for Wealth Managers and processes are there to be adopted, with existing precedents of successful implementations that increase data visibility and quality, the effects of which can be felt company wide.
This thereby reduces the risk whilst maximising the gains to be had for Wealth Managers willing to test the waters of this powerful new technology and associated business processes.
The adoption will not be swift, nor will it be easy, and will necessarily require an overhaul of legacy technology and practices. This must come alongside a shift in behaviours towards data-driven decisions in order to build data informed cultures within Wealth Management that are able to fully utilise the technology at their disposal.
Rising to the challenge of technology
This upcoming generational transfer of wealth is the first that will include digitally innate individuals with differing expectations from their predecessors. With 87% expressing an interest in sustainable investing, the time is now for enhancing and maintaining data quality on both a client level and an investment level that can both service and maintain these expectations.
It is an imperative, therefore, that Wealth Managers become aware of the possibilities that technology and new socio-political or regulatory landscapes offer - such as what happened with Open Banking for the Banking industry.
Learning from the big picture lessons of hindsight, it is not enough to double-down on what the Wealth Managers are good at - the vast experience of individual Wealth Managers and a relatively immovable client base. It is vital to explore the transformational shift that data-powered technology can bring to their business and the industry as a whole.
Whilst there will need to be work done in the Wealth Management space to remove legacy systems that cannot currently derive the insights and data quality needed for organisations, we cannot iterate enough that the industry is not operating from a standing start and value in data can be unlocked now if Wealth Managers are willing to work with an open mind.
Sidebar
An exploration of the possible - how data can be applied now to build the Wealth Management industry of the future
Mudano supports data insights and initiatives at every level for Financial Services firms. We recently successfully deployed end to end customer onboarding journeys for a Tier-1 global bank. This allowed them to see exactly what stages customers were getting frustrated with and stuck on, giving the bank the ability to not only reach out proactively to potential customers with frustrations, but to overhaul their entire process to make it agile and constantly adaptable to changing regulatory and operational requirements.
“Now that the operating model for Wealth Managers is actually becoming far more complex, they need to have a more sophisticated approach to what data management and data strategy looks like..the more forward thinking ones are investing much more heavily in this than others”
Chris Low, Managing Director, Accenture Wealth and Asset Management Practice
One of our more exciting and value driven propositions focuses on the prediction of wealthy individuals up to 24 months before that individual reaches a point of wealth applicable for Wealth Management services. This proposition utilises Machine Learning modelling and disparate datasets to provide Wealth Managers with a current and future looking potential client base, integrating into modern CRM systems and functionality to ensure no potential client is contacted more than once by the same firm.
Whilst we are data experts, there is expertise from all angles within the wider Accenture group that allows us to view and action issues within the industry from an entirely holistic view, not just a data led one. Firms such as Avanade, Orbium, Parker Fitzgerald and Accenture itself will be aligned to the data work we do to ensure end to end efficiency and delivery for all stakeholders impacted.
Incumbents in Wealth Management will have an edge, if they move decisively, over any new player by taking advantage of the technological and industrial expertise that working with a multi-channel partner such as ourselves will bring. “It is vital to explore the transformational shift that data-powered technology can bring to the business and the industry as a whole”
Conclusion
This upcoming generational transfer of wealth is the first that will include digitally innate individuals with differing expectations from their predecessors. With 87% expressing an interest in sustainable investing, the time is now for enhancing and maintaining data quality on both a client level and an investment level that can both service and maintain these expectations.
We are at a point of convergence with lots of other technological offerings enhancing the lives of individuals around the world, Wealth Managers need to be a part of this if they are to capture the wealth of the new generation. The new generation is one in which they expect Wealth Managers to feel, act and even look different. A US study from JD Power found that the average age of WMs is 55, with just 11% being under the age of 45. This needs to change if they are to capture a generation that is younger and more diverse than ever before.
Having an actionable vision is just as important as understanding the vision needed to reach these points of inflection. Wealth Managers today understand the idiosyncrasies far better than any new challengers can, but they need specialists to work with them in a way that allows the formation of a congruent and coherent data strategy that is fit for the future.
There is lots of headway to be made if Wealth Managers are to prepare themselves for future generations and their needs, with data and personalisation through data at the forefront of the next generation. To imagine that there will be a switch to a completely tech driven industry is naive and unrealistic, but technology and data will need to be improved massively to service a client base that cannot be sustained without it.
Wealth Managers will not need to become data experts overnight to take advantage of the tectonic shifts available to them but work with open eyes at the task at hand to get there.