Wealth managers and financial planners are being pushed to speed up their plans to roll out digital tools, as client expectations are outpacing their capabilities.
According to asset and wealth management consultancy firm Alpha FMC, three quarters of wealth firms have made improving their technological offering a top or high priority, although just 23% fully meet what clients require of them.
Additionally, 38% of wealth firms believe their spending in digital solutions is going to increase in the next 12 months.
The consultancy business said that this shows a significant shift in the sector’s stance compared with last year, as around 65% considered technology a high priority and only 27% were increasing budgets.
Alpha FMC surveyed some of the biggest wealth management and financial planning businesses operating across the UK, Emea, Apac and the US.
Obstacles
The main drivers for digital evolution in the advice space are; reducing cost to serve (64%); meeting client expectations (58%); and pushing for scale (54%), Alpha FMC discovered.
Whereas competition, regulation and the pressure on fees and revenue placed last on the list.
The consultancy firm said that, despite improvements in digital capabilities over the last year or so, the covid-19 outbreak and subsequent lockdown have “stress–tested” many firms, highlighting that many may be further behind in the innovation process than they thought.
Alpha FMC believes this is mainly due to “a lack of clarity around the responsibility” for digital capabilities in wealth firms, considering that only 8% of companies polled had a dedicated chief digital officer, and marketing and customer engagement departments did not take the lead on technological innovations in any of the companies.
But these are not the only issues financial planners face, as many companies have to deal with legacy technology, which is often seen as a barrier to progress.
On top of that; a lack of good quality data sources, and the tools to process it, also create a threat to digital innovation.
‘Better discipline’
Kenn Taylor, head of wealth at Alpha FMC, said: “It is clear that firms have had to react fast to the increased remote client servicing forced on them by the covid-19 pandemic, and it is to their credit that they have managed to step up so quickly.
“However, our research reveals that, despite the priority that firms put on improving the customer experience, there is a long way to go. It is clear there are fundamental building blocks which need to be tackled by wealth managers if they are to make better progress to close the gap on their client’s expectations.
“The digital focus for firms continues to be the frequent client touchpoints of client reporting, annual reviews and servicing, but they have also worked out that there are significant cost benefits in digital automation, although this is largely front office orientated at present.
“Firms have long struggled with their legacy technology estates and we see most of the leading wealth managers making progress with large investments to address the issue.
“However, tackling the uncontrolled use of Excel, and getting better discipline into their data mastery and governance, will enable the industry to make further progress to close the yawning gap between their own capabilities and their clients’ needs,” he added.
