Client experience – WealthTech outlook for 2023
We are nearing the end of Q1 and thought it would be fun to do a bit of a roundup of what we have been seeing regarding projections and predictions for this year in the wealthtech space, particularly as it relates to our own domain of client experience.
The Wealth Mosaic, a digital marketplace for wealth management, recently released its WealthTech 2023 Annual Report, US consultancy F2 Strategy published their 2023 WealthTech Outlook Report, and WealthManagement.com discussed the topic in their WealthStack 2023 WealthTech Outlook. And finally Cap Gemini had a few things to say on the topic in their Top Trends in Wealth Management 2023 report.
In this article, we will discuss what the research findings say about the future of digital experiences for high net worth individuals (HNWIs), and the role that technology will likely play this year in its continuing evolution.
Key data insights
- The demand for wealth management services will more than double to 500 billion USD by 2030
- 89% of investors say that their preferred channel will be mobile apps within 2 years
- 60% of clients believe that it is vital to upkeep a human-centred design
- 70% of clients believe that personalization is one of the most critical factors when choosing a wealth management advisor
- 53% of millennials have changed primary wealth management firms in the last year
These statistics show that the needs of HNWIs are evolving, and digital expectations are growing at a rapid pace. The wealth firms that serve HNWIs need to embrace these changes and adapt how they engage with clients if they want to remain competitive in the digital age.
Our top trends in wealth management 2023
We related strongly to two key wealth management trends which emerged from the report:
- The client experience has never been more vital and wealth firms must leverage technologies to enhance digital experiences.
- Wealth management is steadily evolving into an open wealth ecosystem where firms should collaborate with a multitude of vendors to meet client needs.
The importance of the client experience in wealth management
The Wealth Mosaic report underlines the importance of client experience: “The ability to attract and retain clients remains key through leveraging technology to enhance the experience and get an increasing share of wallet.”
Indeed, for F2 this is the number one priority for wealth managers: “Client experiences have become firms’ major differentiator in a competitive marketplace. Technology drives those experiences, from sleek user interfaces to behind-the-scenes data and reporting capabilities that allow advisors to tell a better story. Firms with advanced technology are winning disproportionally.”
Suggested reading: What is a Wealth Management Platform?
Expectations from clients
Digital technologies have caused huge disruption in the wealth management sector and the expectations of HNWIs are evolving rapidly. The Wealth Mosaic report claims that “The client is the sector’s lifeblood, and technology plays an ever-greater role in delivering a modern and relevant client experience.” They go on to say that for the first time, most clients say that access to technology is more important to them than access to a human. Another survey revealed that 82.5% of HNWIs under 40 expect all or most of their wealth management relationships to be conducted online in the next five years.
The Wealth Mosaic report highlights that client demands continue to grow despite the turbulent market conditions in 2022, and firms are coming under increasing pressure to embrace digitisation and provide holistic advice. “The direction of travel remains the same, in that client expectations are continuing to evolve, with the need for transformation more evident than ever.”
The hybrid approach
The Covid-19 pandemic accelerated digital adoption in wealth management as firms were forced to move to remote interactions. This has created more hybrid digital and human interaction models, demanding greater levels of client personalization.
The Wealth Mosaic report also stresses the importance (and challenges) of combining digital services with a human touch: “Embedding a superior digital user experience in combination with human advice and assistance will need, besides human talent, appropriate technology platforms, analytics and integration capabilities.” This same need for a “technology core” was also identified by CapGemini in order to drive effective digital personalization.
CapGemini considered the technology outlook as it relates to client experience, and while they believe that in 2023 firms will continue to drive towards “personalized CX”, they will need to bulk up what they refer to as the “technology core” (data, AI/ML and cloud) in order to deliver on the promise of a scalable, client-centric engagement model.
WealthStack concurs: They believe that with such core data tools in place, the scope of personalization grows. For example, systems can start providing topics for clients using machine learning to trigger outreach and engagement. The systems will be able to create content itself, but also simpler tasks such as automating reminders to clients to keep track of things which were agreed to be carried out in online conversations. This is automation which is introducing efficiencies while keeping it personal. They believe that this area of “advice engagement” will continue to evolve with the introduction of gamification and visuals, to drive engagement and potentially grow the opportunities of adding value beyond investments.
And F2 points out that while firms invest in integrated mobile-friendly client experiences, self service, document sharing, and messaging, they should also implement data point tracking to measure the success of these new capabilities, and feed the outcomes back in to the personalization cycle.
Suggested reading: Using the power of AI language models to better target compelling investment ideas
Internal inefficiencies still weighing on client experience
One industry shift identified in the Wealth Mosaic report is the adoption of “digital is today”. This is where attention is moving beyond efforts to improve back office efficiencies, and into the front office to boost client engagement and growth.
WealthStack agrees, and believes that the biggest opportunities for wealthtech providers this year are to continue addressing these inefficiencies within firms in order to drive client experience improvements. This includes triggering things automatically, timely notifications, and automating steps to move activities forward, layering tech on top of the CRMs to make them more actionable as part of workflows. All of this frees up the relationship manager.
They also believe that chatbots in wealth management, despite their currently rudimentary state, will increasingly be able to help here. “They will continue to get better and should be able to easily handle the basic tasks over time as the underlying data improves eg want to change a beneficiary and guide to or send the correct form. They are getting smarter and smarter.”
Nurturing relationships and providing a value-added client experience should be at the core of every wealth management firm. In our opinion, the future of wealth management is about providing a 360-degree view and improving digital experiences for HNW clients using wealth management platforms and other digital tools.
The importance of collaborating with external vendors and working towards an open wealth ecosystem
Another key theme highlighted by the Wealth Mosaic report was the importance of partnering with external vendors to meet all client needs.
“The need to reach out and collaborate with a multitude of vendors to achieve a wide set of goals across the wealth management community is becoming widely accepted.” Technology vendors can share valuable expertise and will play a key role in helping wealth firms adapt and embrace digital transformation.
Moving towards an open wealth ecosystem
The report also suggests that the digital transformation of wealth management will slowly evolve into open wealth ecosystems. “Open platform architectures are easier than ever to integrate into the core processes, for example by open banking and open wealth APIs.”
This shift towards an open wealth ecosystem will mean that HNW clients will have access to a wider range of products and services than ever before.
Building an open platform which can easily integrate third-party services is a necessity if firms want to enhance customer experiences and reap the benefits of digital transformation. Wealth managers must embrace these changes or risk getting left behind.
The tech challenge for wealth managers today
The major challenge of wealth managers today is balancing exciting opportunities to enhance the client experience while simultaneously addressing outdated systems, culture and talent gaps.
“The technology that enables the wealth manager of tomorrow will be very different from the monolithic, multiple, and disjointed systems of the past. They will progressively evolve to embrace fewer, more aligned, technology and data solutions, and collaboration both within and outside the enterprise.”
Firms must develop new technology action plans that will help them implement digital tools in a way that is collaborative and agile. Driving business growth and value will involve a combination of new technologies, external partners, and enhanced in-house capabilities.
The WealthTech 2023 reports highlight several important wealth management trends that are shaping the industry today. Two main themes stood out from our perspective: the importance of enhancing client experiences using digital technologies and the need to collaborate with multiple vendors to meet client needs.
Topaz is helping firms embrace the future of wealth management
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