Digital transformation in wealth management…at last!

Digital transformation in wealth management…at last!

After a decade of technological resistance, the wealth management industry is finally on the verge of digital transformation. In this post, we dive deep into why wealth managers have been slow to adopt new technologies and how they can speed up the process and remain competitive in the new digital age.

Author: Cygnetise –



Despite the accelerated wave of digitalisation in the global economy over the past decade, the wealth management industry has been lagging behind. With strong customer relationships, brand legacy and tightly regulated business practices, firms have been resisting the early disruptions of technology. However, the major shift to remote working and the increasing adoption of digital financial solutions due to the COVID-19 pandemic, have opened up a new opportunity for challengers to enter the market and disrupt the sector.

Facing the new digital reality where flexibility and convenience prevail, clients are starting to put pressure on the current client engagement model in wealth management, demanding greater personalisation and efficiency. In addition to navigating the changing customer expectations, wealth managers are also being challenged internally to strengthen their operations and increase productivity in the midst of the shrinking profits and rising regulations in the sector.

So, how can incumbents tackle those challenges and thrive in the new era of hybrid advice? In this post, we look at 5 possible digital strategies wealth managers can adopt to remain competitive and grow in 2022.


Why wealth managers have been reluctant to embrace digital transformation

The traditional wealth management business model is built on developing tight personal relationships, being heavily reliant on multiple manual processes and in-person client interactions. This in combination with the ever-increasing regulatory burden has prompted wealth managers to remain resistant to digitisation.

According to Bill Packman, Head of Wealth and Asset Management Consulting at KPMG, the incumbents in the sector have simply not felt the need to innovate:

“They haven’t necessarily changed the way they’ve operated because they’ve got millions of clients. They look after their balance sheets and they’ve got risk-averse compliance processes that probably mean that with a regulator looking over their shoulder, they don’t feel the need to experiment.”

But this inertia opened the door for a new wave of digital wealth management providers to enter the market and address any product gaps.

“There’s a market segment called ‘$100,000 to $1m’ and that area has been opened up by technology,” says Ian Woodhouse, Head of Strategy and Shange at Orbium, part of Accenture Wealth Management. “With new tech, you can offer a much lower-cost provision of advice or guidance to clients who couldn’t otherwise afford wealth management.”


Key drivers to digital transformation in wealth management

A number of digital challengers have sprung up to explore the emerging opportunity for innovation in the wealth management industry. Amongst the most popular ones are Robinhood and e-Toro, which have given retail investors access to global stock markets without the usual hefty management fees charged by brokers and traditional asset managers. Acorn and Stash, on the other hand, help people round up their spare change and automate investments. The so-called ‘Robo advisers’ who provide automated investment advice online, thus grew their assets under management (AUM) to a total of $827 billion in 2019, as per Statista.

In addition to offering more accessible and low-cost investment solutions, digital wealth challengers often win clients with user journeys or experiences that better match their increasing digital expectations.

Below, we’ve summarised the key factors that have been driving digitalisation in wealth management:

Low margins and cost pressure – The increasing pressure for democratisation and fee transparency from regulators and customers has been driving costs up and profits down for traditional players in the sector. The use of complicated legacy infrastructures including various manual and paper-based systems, resulting in burdensome or disconnected workflows, have further reduced productivity and profitability within organisations.

“Traditional wealth management providers have layers of inefficiency that are ripe for automation. 30% of the front office [staff] create data for other people to look at… and they don’t necessarily generate insights from that data, just the ongoing work of creating reports, whether it’s client reports, regulatory reports or tax reports. This is just an operational burden, which adds layers of cost into a value chain which ultimately the investor has to pay for.”

— Bill Packman | Head of Wealth and Asset Management Consulting, KPMG

Competition – Digital wealth providers have been challenging the traditional wealth management model by offering more personalised and efficient digital experiences that match the changing client expectations.

Changing client expectations – Customers are becoming more digitally savvy and expecting the same frictionless, personal and convenient user experience from all their service providers. The market fluctuations and the lack of efficient interactions with advisors during the pandemic have further driven clients’ demands to have access to more transparent and prompter information about their assets and investments.

Maturity of technology – The world is becoming digital-first and the COVID-19 pandemic has only accelerated this trend. Organisations across the globe are now facing an increasing need to digitally transform their operations and improve their efficiency, whilst remaining resilient throughout the change and any potential threats in the economy.


5 digital strategies wealth managers should adopt to remain competitive and grow in 2022

According to Deloitte, the future leading wealth managers will be those who focus on their strengths, offer clear added value to clients, have a strong digital presence and provide cost-effective products and services.

A recent study by FactSet on “the way forward for the wealth management industry in the new era of hybrid advice” has also reaffirmed that projection, revealing that investors across the entire wealth scale – from the mass affluent customer with $100 to invest to the ultra-high net worth (UHNH) investor worth $10mn – are already embracing online investing platforms. About 9 out of 10 investors use digital platforms to complete some investment activities, whilst nearly 50% use them to independently search for or even purchase new investment products.

“It’s almost like we’re democratizing the stock market to a certain extent, so that younger people can get involved and start building their wealth from a younger age.”

— Cerrith Moore | Financial Controller, WealthTech Moneybox

But, how can wealth managers most effectively navigate the transformation of the sector? In the following section, we take a look at 5 possible digital strategies wealth managers can adopt to remain competitive and grow in 2022.

1)    Put clients at the centre

One of the most important factors for any successful digital transformation project is customer-centricity. With customer engagement at the heart of the traditional wealth management model, being customer-centric is becoming a must for any provider who wants to succeed in the digital world.

But, customer-centricity requires more than just a strong CRM system and a first-class user experience and interface. It needs a multi-faced and highly systematic approach that puts clients at the forefront of the entire organisation and all operations and communications. The wealth managers of tomorrow will need to have a deep understanding of all client journeys, their unique pains and solution demands. Only by achieving this level of customer-centricity, they’ll be able to develop a winning and resilient digital strategy.

2)     Adjust the customer experience to address the early adopters’ expectations

When developing digital transformation strategies, many wealth managers only think about the millennial segment. Whilst this might be a good starting point, to move at scale, wealth managers should focus on those who’re ready to adopt new investing technologies instead – the so-called “Early Adopters”. The early adopters are usually digitally savvy individuals or self-proclaimed “tech evangelists” who will therefore be willing to have more online interactions and provide essential user behaviour insights, which can further reduce the risk of a failed product-market fit.

3)    Choose a hybrid, omnichannel customer engagement approach

Whilst digitalisation is inevitable, one thing that for sure is not going away in the wealth management sector is the personal or client-facing interaction. When it comes to their personal finances and investments, most clients are still feeling more comfortable and secure when they know that there is a human at the other side of the screen. So, adopting an omnichannel or hybrid wealth management service model might be the perfect solution that offers the best of both worlds – online and traditional face-to-face services. Finding the right balance between Robo and human touchpoints will therefore be the key to any successful digital wealth management strategy.

4)    Drive value through automation

As mentioned earlier, the wealth management industry is characterised by extremely complex, inefficient and manually-heavy internal legacy infrastructures. Innovative fintech and regtech providers have developed various automation solutions for incumbents to strengthen their operations and increase profitability by harnessing the power of emerging technologies like AI, machine learning and blockchain.

One such provider is Cygnetise that used blockchain to digitise the process of managing trade authorised signatories and bank mandate, making it more efficient and secure – minimising the risk of signature fraud and financial loss.

“By partnering with a FinTech, a wealth manager can upgrade internal capabilities by jointly developing nonstandard solutions.”

— EY

5)    Focus on the outcome instead of the product

The traditional wealth management business model is based on product selling. As clients become more digitally empowered and demand greater personalisation and transparency, wealth managers who want to continue thriving in the digital age will have to shift to a more goal- or outcome-oriented product offering approach. By using advanced client profiling and data management digital tools, incumbents can deliver truly personalised and relevant customer experiences and products that meet both – clients’ short- and long-term needs and objectives.

In conclusion, client-centricity is the key to digital transformation in the wealth management industry, with hybrid advice and automation driving the trend. At Cygnetise, we help wealth managers and banks to eliminate the burden of manually managing authorised signatories, traders lists and bank mandates whilst contributing to their ESG goals and minimising the risk of fraud.

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