Capgemini published their top trends for 2020 and as a data company operating in the wealth management sector, the report is a must-read. Even though we’re already almost halfway of 2020, we’ve listed the nine trends mentioned in the report. What trends have you already seen?
1. Sustainable investing is redefining asset management
Wealth management firms try to shift their focus to an ESG strategy (economic, social, and corporate governance) to have diversified products with increased client engagements and to promote a sustainable mindset among advisors with an enhanced brand image. To foster mainstream momentum, sustainable investing is gaining mindshare among wealth managers and investors. Drivers are the demand from customers, lower market risks and improving returns, and regulations mandate.
2. Demographic shift spurs firms to maximize intergenerational wealth transfer opportunities.
Firms should develop an innovative investment model to attract the new-age clients, such as millennials. Research by CNBC shows that 80% of heirs will seek financial advice when inheriting their parents’ wealth. Besides that, women seek a more emotional bonding when it comes to their client-advisor relationship. For example, firms could be innovating and undertaking initiatives that focus on empowering HNW women, such as JPMorgan’s Women on the Move initiative.
3. Omnichannel offerings are essential for seamless customer engagement
With the increased importance of digital influences, a research by FIS Global showed that 97% of the consumers believe in a smooth and simplified customer experience. An omnichannel experience offered by a firm can be the golden ticket to differentiate itself. An omnichannel framework suggested by the Capgemini report should include three factors: (1) consistent with interfaces for enhancing experiences, (2) consolidated with customer data for insights gathering, and (3) collaboration with vendors for developing multi-channel capability.
4. Hyper personalized services can be a key differentiator for wealth firms in the new era.
The Capgemini World Wealth Report 2019, showed that 40% of the HNW clients weren’t satisfied with the level of personalization from their firms. If the focus within a wealth management firm is on hyper-personalization the firm can differentiate itself within the market. For instance, by engaging in a more individualistic manner with a value-based segmentation approach. Swedbank, for example, implemented ‘Nina’: an AI-powered chatbot that offered a high degree of personalized communication.
5. Emotional analytics can personalize the client experience.
As mentioned, personalization will be a key ingredient to differentiate. In line with this is the use of emotional analytics, as each person is unique in making investment decisions. Analyzing the emotions of a client will help investors make better decisions and create highly customized offerings. Artificial Intelligence solutions such as a digital assistant (AI-powered) might be an opportunity.
6. Firms consider AI solutions to enhance advisor effectiveness, improve client satisfaction.
Some wealth management firms are experimenting with AI to understand its potential capabilities and limitations on their current future business models. By developing AI solutions, the expectations of a new generation of tech-savvy HNWIs can be fulfilled. Using AI, wealth managers can also gauge real-time market sentiments to understand the movement of tradeable assets better and provide sophisticated advice to clients. AI can help drive costs down and improve the performance of the wealth managers so they become more stable and consistent, which will allow more time for interaction with clients.
7. APIs foster innovation and create new channels of growth for wealth management firms.
Wealth management firms can unlock scalability in their digitization journey using the power of open APIs. Given the enhanced focus on digital transformation, APIs provide customizable and agile platforms. Here again, investors using APIs can provide better client services. WealthTech startups now offer generic APIs for third-party integrations that can be modified based on a firm’s specific functionality needs. One of the key drivers is that the growing number of younger HNW individuals demand personalization through digital channels which shifts the wealth management paradigm to prioritize the customer experience. In addition, APIs foster simplified information sharing and analytics for institutional clients.
8. Information security continues to be a prime concern for wealth management firms.
The financial service sector was among the top three industries affected by cyber-attacks such as spear phishing, malware, and viruses. Data leaks and breaches can stir client mistrust, disloyalty, and churn. Wealth management firms should prioritize cybersecurity as a part of their operational budget allocation. The Capgemini Financial Services Analysis (2019) highlights four cybersecurity focus areas: (1) adaptive frameworks: change management with setting up of adaptive processes and frameworks to manage data driven-compliance requirements, (2) talent development: re-skilling of existing workforce and acquisition of key talent in cyber-security specific sub-domains, (3) in-house capabilities: investments in AI, ML, and Cloud infrastructure to boost threat management and secure data storage, and (4) collaborations: effective collaboration with digital security vendors/solution provides to plug gaps.
9. Artificial intelligence simplifies client onboarding and KYC processes.
Manual onboarding processes can make fraud detection and other due-diligence methods difficult and error-prone, besides being time-consuming and cost-intensive. Many wealth management firms are investing in AI for automating the KYC process through collaborations with RegTechs, FinTechs, and other third-party vendors. Additionally, firms are developing in-house capabilities to speed up the due diligence process. AI in client onboarding might impact your firm in the ways of faster and accurate processing of data, seamless integration of onboarding modules, talent optimization-manpower costs reduction, and enriched customer experience.