Wealth management stands at the edge of a new era driven by digital disruption. Client expectations have markedly shifted, with investors—especially younger generations—now seeking digitally-enabled, personalized service models aligned to their broader life goals. At the same time, margin pressures combined with volatile markets mean firms must improve efficiency to remain competitive.
Those wealth managers that successfully navigate comprehensive digital transformation will grow market share, better serve clients, reduce costs, and future-proof their operations. The graph below shows wealth managers’ digital maturity by region currently, indicating ample room for progress industry-wide.
Wealth Management Firms‘ Digital Maturity Levels by Region
Source: Capgemini World Wealth Report 2022
This transformation entails more than bolting on piecemeal digital solutions. To meet escalating client demands and operational challenges, firms must embed digital capabilities into the very fabric of their businesses from front to back office.
Fortunately, a variety of cutting-edge technologies now exist to catalyze every aspect of this digital shift. When strategically harnessed, these technologies can strengthen client relationships, unlock efficiencies, and open new growth opportunities.
Personalizing Client Experiences Through Advanced Analytics
In Deloitte’s 2021 Global Wealth Management Survey, 71% of high-net-worth clients said they would readily provide more personal information to wealth managers in exchange for hyper-tailored services aligned to their unique priorities.
Sophisticated analytics fueled by artificial intelligence (AI) and machine learning makes this level of personalization and customization possible even at scale. By applying predictive algorithms to aggregated client data, wealth managers gain sharper visibility into investors’ risk tolerances, goals, preferences, and behaviors.
Relationship managers at Atlantic Trust apply analytics in this way to coordinate teams of specialists that deliver 360-degree advice tailored to 75% of served high-net-worth clients. Advanced analytics enhances connectivity between clients and advisors, fostering loyalty through relevant guidance attuned to investors‘ whole-life needs.
Wealth frontend digital platforms also increasingly harness analytics to serve up personalized insights and guidance. The graph below shows the strong growth forecasted in coming years for robo-advisors, which apply complex algorithms to investor inputs in order to automatically generate targeted portfolio guidance and investment recommendations.
Global Robo-Advisor Market Forecast
Source: Mordor Intelligence Global Robo Advisory Market Report
For portfolio managers, analytics engines crunch vast quantities of structured and unstructured data to spot correlations and patterns difficult for humans to perceive. As an example, Morgan Stanley Wealth Management built its Next Best Action engine using machine learning trained on historical trades, performance benchmarks, and client data. This produces real-time investment recommendations tailored to align with customers’ market outlooks and risk-return objectives. Adoption of Next Best Action increased assets under management 10% by better matching clients to suitable trades.
Wealth Management Analytics Use Cases
| Capability | Techniques | Outcomes |
|---|---|---|
| Holistic Client View | Centralized data lake combining account records, transactions, interactions, CRM notes, external data | 360-degree client insight for hyper-personalization |
| Trade Recommendations | Supervised models analyzing investor data, portfolio distribution, market indicators | 10% increase in net flows from better trade alignment |
| Predictive Life Event Triggering | Unsupervised learning on transaction patterns, account fluctuations | Proactive engagement for loyalty and retention |
| Automated Reporting | Natural language generation mapped to data visualizations | On-demand personalized portfolio views with advisor guidance |
Boosting Efficiency Through Intelligent Automation
While advanced analytics focuses on enhancing front office capabilities, wealth management firms also rely on digital transformation of middle and back office operations to boost efficiency and productivity. Process automation using smart software robots and artificial intelligence serves as a lynchpin for these operational improvements.
By automating slow and repetitive manual workflows, firms reallocate employees to higher-judgment activities like client service while substantially reducing costs. The chart below indicates the range of efficiency gains financial institutions realize by applying intelligent process automation techniques.
Intelligent Process Automation Efficiency Uplift
Source: McKinsey Global AI Survey
Transaction processing represents one area with major efficiency upside from automation. Software robots can rapidly ingest forms, extract unstructured data, update records, and trigger system actions with over 99% accuracy. This allows staff to focus on assessing and fulfilling complex client needs rather than mundane data tasks.
Compliance proves another function using intelligent automation for streamlined workflows. Software continuously scans trades, account information, and documents to automatically flag irregularities for human review based on risk algorithms. This lets compliance managers concentrate investigation on the most high-risk items while accelerating overall processing volumes. Through this approach Credit Suisse sped up compliance processing by 80%.
As mergers continue across wealth management sector consolidation, robotic process automation and AI ease data integration pain points by automatically transferring and validating investor information across systems. This reduces risk, saves months of manual effort, and accelerates capturing targeted merger synergies.
Wealth Management Automation Use Cases
| Process | Automation Techniques | Benefits |
|---|---|---|
| New Client Onboarding | Data extraction and validation, form filling, record creation | 70% faster account opening |
| Ongoing Transaction Processing | Rules-based bots performing data entry, reporting, reconciliation | 90% cost reduction |
| Compliance Reviews and Alerting | Risk-based statistical models, natural language processing | Greater coverage with fewer false positives |
| Merger and Acquisition Integrations | Data migration utilities, exception handling | 90% less implementation effort |
Enhancing Security and Agility With Cloud Computing
Migrating wealth management data and applications to the cloud unlocks game-changing improvements in security, flexibility, and scalability. Cloud’s anywhere access and seamless integration with software ecosystems also foster collaboration across distributed teams, third parties, and fintech alliances.
Legacy on-premise IT infrastructure requires large upfront capital outlays and lengthy procurement cycles, starving innovation budgets. By adopting cloud-based software-as-a-service, wealth managers redirect their budgets from maintaining information silos toward client-centric transformation powered by elastic infrastructure. Usage-based pricing allows scaling outlays to business needs rather than forcing overprovisioning for peak demand surges.
The ability to spin up robust disaster recovery provisions on demand means even smaller firms gain resilience on par with top-tier institutions. Leading cybersecurity measures keep critical systems and sensitive customer data shielded from attackers lacking cloud credentials. An IBM study found financial services firms running production systems in the public cloud enjoy security breach costs 60% lower than industry averages.
Transitioning key applications to software-as-a-service also delivers immediate access to the latest features without costly upgrades. Cloud‘s flexible integration fabric, open API architecture, and global connectivity foster real-time collaboration across teams, subsidiaries, and third parties. This creates nimble ecosystem enablement to deliver embedded financial experiences aligned with clients’ expectations.
Global Public Cloud Services Market Forecast – Financial Services
Source: Gartner
As shown above in Gartner’s global public cloud market spending forecast, financial services adoption continues rapidly accelerating, expected to pass $15 billion in outlays next year.
Enhancing Transparency and Reducing Costs With Blockchain
While public cloud builds crucial capability, wealth managers also need customizable security models safeguarding privacy across ecosystems. Hybrid blockchain architectures allow firms to partition public transparency from permissioned confidentiality. Storing golden copies of reference data like security master files on shared ledgers makes reconciliation efficient while smart contracts systematize cumbersome manual efforts around account openings, transfers, and corporate actions.
Blockchain brings another key benefit through immutable logging of transactions. Adding an indelible tokenized transaction record on distributed ledgers enhances transparency, improving auditability and risk management. Storing KYC/AML verification status on chain facilitates permissioned data sharing across counterparties as well.
As blockchain capabilities progress, expect even wider applications like fractional asset ownership and embedded tax handling. While still maturing, leading wealth management CIOs are investing now in blockchain expertise to extract its emerging possibilities, including:
Onboarding and Servicing
- End-to-end digital account opening and funding via smart contracts
- Push notifications and visibility into account changes
Portfolio Accounting and Reporting
- Shared reference data reconciliation
- Automated daily portfolio valuation based on oracle links
Compliance and Risk Management
- Storing KYC regtech status for simplified sharing under privacy controls
- Asset servicing lifecycle event visibility
New Product Innovation
- Fractional share offerings through tokenization
- Embedded tax handling via smart contracts
Determining the appropriate intersection of public transparency and permissioned privacy represents a crucial strategic consideration when evaluating blockchain approaches. Wealth management technology leaders must carefully analyze this public/private continuum to balance security, efficiency, and future extensibility based on their digital aspirations and risk parameters.
Key Factors for Blockchain Strategy Selection
The Future of Digital Wealth Management
While advanced analytics, robotic automation, cloud computing, and blockchain represent pivotal technologies transforming digital wealth management, they merely scratch the surface of what leading firms now harness to enhance client service and operational performance.
Cutting-edge capabilities around virtual augmented advisors, embedded analytics, decision support systems, application marketplaces, data mesh architectures, and more continue pushing the boundaries of what technology can bring to bear for both investors and institutions. Modernization requires a multi-year roadmap woven into the fabric of firms’ strategic visions and cultures.
Architecting this digital future necessitates an adaptive mindset and agile approach to baking innovation into business-as-usual practices. Wealth management CIOs must chart programs to incrementally embed and smartly orchestrate new technologies while simultaneously upgrading cyber defenses as part of a broader commitment to clients, capabilities, and change management.
The graph below summarizes capabilities maturity progression CIOs can utilize to benchmark and guide their firms’ digital modernization journeys:
Wealth Management Digital Maturity Progression
While market pressures and client expectations make inaction untenable, missteps from moving too hastily present equal risks. By taking a phased, business-driven approach wealth managers mitigate disruptions while injecting advanced functionality that delights investors. Firms launching comprehensive modernization programs today will gain first-mover advantages that translate into market share growth, improved efficiency, and client loyalty—cementing their leadership for the next era of digitally-powered wealth management.
