The Need for Digital Transformation in Wealth Management
We have blogged about this before but it is such a prevalent issue that it bears repeating: there is a significant ‘digital divide’ between wealth management clients (particularly Millenials) and their advisors, a divide which is disrupting the traditional wealth management model.
A recent paper by The Boston Consulting Group put it succinctly:
“Although the traditional wealth manager-client relationship will continue to emphasize face-to-face contact and the sense of trust that such contact engenders, digital communication will radically redefine and enhance the relationship, effectively changing the dynamics of competitive advantage.”
The report goes on to substantiate the claim by showing that wealth managers that leveraged their digital services reduced client attrition by 5%, increased revenue from cross-selling by 2-5%, and realized efficiency gains through automation and streamlined processes by 10-15%.
Yet, while the promise of enhanced competitive advantage is there, most wealth management firms remain behind the curve when it comes to digital transformation. Whether mired in tradition and status quo or simply lacking the knowledge on how to start the process, these companies have lagged and there is a growing urgency for them to act. The surprisingly rapid growth of automated investment platforms (aka. robo-advisors) in recent years is a testament to the fact that more and more investors are simply not satisfied with the traditional model.
The right planning, experience design and digital tools can help wealth management firms bridge this digital divide, enhancing the overall wealth manager-client relationship. It remains to be seen how quickly they are able to do so and what the consequences will be in the interim.