Interview

New trends are pushing wealth and asset management firms into becoming digital-first businesses offering clients immersive digital experiences and real-time support, together with more personalized products and services. The industry will also rethink their environmental, social and corporate governance investments, pushing sustainability to the forefront of their priorities. 

To shed light on how these shifts will transform the industry, ThoughtLab is conducting a multi-client research program titled Wealth and Asset Management 4.0. We asked experts and sponsors of the study to offer their perspectives on how the pandemic has affected investor behaviors and preferences, trends in the industry, and the implications for their businesses.
 

How is your firm rethinking its strategies, processes, communication, and business models to succeed in a digital-first world? How are you leveraging AI, cloud, blockchain, and other latest technologies?  

Joe Norburn, CEO, Recordsure: Wealth and asset management firms should be focused on utilizing the latest advances in Machine Learning and AI to support their operations. Strategically thought-out implementation of AI analytics and RegTech tools deliver significant business benefits – address key pressure points, manage risks, and offer business efficiencies at scale. 

Manish Moorjani, Senior Director Product Management, PublicisSapient: Shortening time to market for new tools and features and early validation through A/B testing enables firms to stay competitive and provide value to end clients. Sentiment analysis of media and news for investment decision making is also valuable, by leveraging AI and Cloud capabilities. Another best practice is adopting best in breed products and platforms for order execution and accounting and focusing on the firm’s strength. 

How is the nature and location of work likely to change in the years ahead? How will employee experiences and process change, particularly for financial advisors? 

Mike Park, CEO, TCC Group: Healthy organizational culture plays a prominent role in delivering commercial success. Being forced to move away from traditional office working opened fresh opportunities to utilize digital communication channels, reduce business travel and offer greater flexibility to the way we work. With many employees enjoying the advantages of increased flexibility, a hybrid way of working is expected to be the future – yet it is poised to bring new challenges. Less direct contact between employees on a daily basis could potentially increase conduct risk due to the decreased opportunity to directly observe behaviors. Processes that worked in the office or in a short-term wholly virtual environment may not be sustainable for a hybrid future. Focusing on culture and the desired behaviors of employees will help firms successfully manage the operational shift ahead. 

Which regulatory and tax trends are having the biggest impact on your business? How will your firm adapt its strategies, systems, and services to meet client needs, while staying compliant?  

Chiara Gelmini, Solutions Marketing Lead, Appway: We learn from our customers that Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) are going to be major focus areas in the regulatory compliance domain, specifically thinking of the due diligence impacts on CLM practices. It’s the ‘Era of the KYX’, aka Know Your ‘Everything’.  

KYC (Know Your Customer) it’s going to require more and more attention and dedicated resources as well tools, with WM’s SMEs proximity to client facing functions being a crucial aspect to fix.  

A growing focus around KYT (Know Your Transaction), with more stringent requirements arising across jurisdictions and demanding dynamic, collaborative and informed approvals and RFI and EDD orchestration.  

KYI (Know Your Investment), with increasingly blurry lines between KYC and suitability profiling, it is now time for more conscious and thorough understanding of client’s investment goals and decisions. All tying into ESG and rising social responsibility. 

Overall, compliance officers are seeing further pressure and cost coming into their operations to mitigate new challenges – continuing the trend of being asked to do more with less. The ‘holy grail’ is improving efficiency and agility, while reducing TCO – and this is possible with the right combination of tools, but the effort should not be underestimated.
 

Joe Norburn, CEO, Recordsure: To help organizations drive operational resilience and stronger compliance, the implementation of AI-driven RegTech tools should feature as the key priority on the technology strategy roadmap. Compliance monitoring across recorded conversations and case file documentation truly sets firms apart as it provides the ability to cover every interaction, spoken and written, between firms and their clients. Introducing the right RegTech solution also means cost savings as less time is spent on administrative tasks and files reviews, improved risk management, more insights and better client outcomes. 

How far will organizations need to go to incorporate ESG into their business strategies? Will that involve new investment products? Better analytical tools? Greater public-private partnerships? Other? 

Sabrina Bailey, Global Head of Wealth Management, Refinitiv: In the past, the prevailing mindset was that ESG investing was no more than corporate altruism.  This perception has steadily changed, with investors increasingly viewing ESG investing as central to their investing strategies and wealth firms differentiating their services using ESG criteria. This trend is set to continue, and we expect ESG-related considerations to have ongoing and ever-greater implications for the wealth industry. We see tremendous opportunity in offering access to complete data that is transparent, granular and standardized.  There is also an urgent need for detailed analytics to deliver actionable insights with intuitive visualization that helps market participants make sense of data.  Furthermore, ongoing education will remain crucial as investors continue to define what good governance looks like. 

Olivia Fahy, Head of Culture, TCC Group: Firms need to fully embed ESG considerations into their strategies rather than treating ESG as an add-on. Purpose can be an excellent driver for ESG considerations as it helps organizations determine how they provide social value and embed practices that support this throughout the business. Focusing on driving a healthy and purposeful organizational culture will incorporate many considerations that fall under the ESG acronym. With organizations coming under more pressure from clients, employees and investors to demonstrate robust ESG strategies, future-oriented firms are already incorporating ESG into their organizational culture to their advantage. 

What lies ahead: Wealth 4.0 

What are the biggest opportunities and challenges that lie ahead for your organization?  What will be the impact of demographic, regulatory, digital, competitive, and economic shifts? 

Olivia Fahy, Head of Culture, TCC Group: Firms are facing social and environmental challenges, such as the need to break barriers around diversity and inclusion and make progress in relation to climate change and sustainability. Such challenges can generate new opportunities, providing firms with the chance to positively impact the world, drive change, and make a real difference for the future. Implementing these kinds of changes requires culture change, an ambitious yet gratifying task. Culture transformation leads to strategic advantages, better treatment of employees and clients, and a more sustainable business.    

Joe Norburn, CEO, Recordsure: One of the biggest challenges for firms is to ensure continuity and to be prepared for the unexpected. Wealth and asset management firms have the unique opportunity to better their operational excellence by implementing new technologies such as RegTech. Technologies and AI do not replace people but make them more efficient at what they do by focusing on priorities. RegTech offers unique monitoring and reviews that help address key pressure points and compliance, mitigate risks, and deliver cost-efficiencies. 

What will the wealth and asset management industry look like in five years? What advice would you give to wealth management firms to ensure their place in tomorrow’s new marketplace? 

Mike Park, CEO, TCC Group: Employees, clients and investors are increasingly expecting wealth and asset management firms to be more purposeful and responsible. Firms need to listen and act on these expectations, or risk people voting with their feet. By focusing on culture with the same level of importance as business strategy, firms can drive the right behaviors, do the right thing, add social value, and ensure their place in the future. 

Sabrina Bailey, Global Head of Wealth Management, Refinitiv: Obviously digital transformation is crucial. However, it’s important to remember that the investor should always come first. The future of the investment and wealth management industry being about digital and human elements coming together. Trust will continue to be the cornerstone of strong relationships and will continue to be supported by robust, and evolving, digital tools that drive rich human connection.

Joe Norburn, CEO, Recordsure: The wealth and asset management industry is facing new exciting times of transformation. The incredible advances in the wealth technology solutions available are already paving the way for operational resilience and stronger compliance. Firms that deliver high-quality advice to their clients, coupled with rich and engaging well-monitored technology, will be incredibly successful over the coming years.

The coronavirus pandemic has accelerated digital, social, economic, and demographic shifts across the world and across industries. Within the wealth and asset management industry, investor attitudes, needs, and expectations are undergoing lasting changes, and the playing field for investment providers is shifting. Investment providers will need to act quickly to compete in the next era of wealth management.

To investigate these developments and how digital, social, and economic shifts will transform the industry, ESI ThoughtLab is conducting a multi-client research program titled Wealth and Asset Management 4.0. We asked industry experts and sponsors of the study to offer their perspectives on how the pandemic has affected investor behaviors and preferences, trends in the industry, and the implications for their businesses.

The Impact of Disruption: The megatrends transforming the industry

What are the biggest disruptions affecting the wealth and asset management industry today? To what extent will these megatrends transform the industry? Do you see the rise of a new normal?

Mike Park, CEO, TCC Group: The shift towards organizations being purpose-led with a focus on creating social value and benefiting society rather than just generating profit has the potential to transform the wealth and asset management industry and signals a major culture change. The significance of organizational culture to business success has been well documented over the years, yet the global pandemic highlighted its critical importance. Where traditional objective-driven operations struggled to adjust during challenging times, firms with a focus on their culture—promoting collaboration, innovation, and empathetic leadership—showed a better ability to adapt and perform during the crisis. With employees, consumers, and investors increasingly demanding that firms step up regarding social and environmental responsibility and proactive management of diversity and inclusion, firms who do not take their culture seriously will soon get left behind. A healthy culture is a must have, not a ‘nice to have.’

Chiara Gelmini, Solutions Marketing Lead, Appway: In the past years, the financial services industry has been hit by multi-dimensional, dynamic disaggregation with impacts across the value chain, channels, data and systems, and the regulatory landscape. Now, the industry is challenged on a whole new degree of disruption, impacting primarily client engagement, productivity, and business composability. As in every crisis, 2020 was a catalyst for true change, and we’ll see its impacts over the next five years.

Joe Norburn, CEO, Recordsure: The pandemic-driven disruption to traditional face-to-face interactions between clients and agents has led to fundamental changes in the wealth and asset management industry. Faced with business continuity challenges, firms introduced new alternative methods of communication. While such decisions were made of necessity, the new client-agent communication channels are quickly becoming the new norm due to their convenience and flexibility. Similarly, monitoring and analysing customer interactions across all channels to ensure fair treatment and compliance is quickly growing into a significant operational requirement.

How has the pandemic accelerated the transformation of the industry? What lasting changes in wealth and asset management should we expect from the pandemic?

Sabrina Bailey, Global Head of Wealth Management, Refinitiv: Digitalization has been a megatrend for quite some time; the pandemic exponentially accelerated this as a focus for many firms. The lack of face-to-face interaction encouraged firms who may have previously been reluctant to transform or adopt digital tools to do so, or risk losing out to competitors and falling behind. The way in which the wealth advisors interact with clients, and the way in which clients define “white glove” service, have changed at a fundamental level. The constant challenge with digitalization is the continued increase in hyper-personalization expectations. Communicating with clients and providing investment advice digitally is one thing; the real differentiator is the ability to personalize these interactions in order to build strong, sustainable, and trusted relationships. This is especially true in an environment of fee compression, robo-advisors, and new forward-thinking start-ups. Providing sound investment advice, personalized to the specific needs of investors by truly understanding their situation, needs, wants, values and desires, will be the real differentiator in wealth management.

Mike Park, CEO, TCC Group: The rapid operational adjustments that wealth and asset management organizations endured in response to the pandemic emphasised regulatory compliance issues. As we are entering the post-pandemic world and the emerging hybrid model of home- and office-working, firms continue to be exposed to client mismanagement and compliance issues. Firms will need to carefully consider how to drive a healthy culture in the new working environment to mitigate these potential conduct risks. Healthy company culture plays an integral role in linking compliance and commercial success for wealth and asset management organizations.

Chiara Gelmini, Solutions Marketing Lead, Appway: In the past decade, innovation dominated strategic priorities, though with “arbitrary” and shifting emphasis. Although more hybrid models of interaction were emerging, the high-touch physical interplay was seen as the “Plan A” in wealth management, while digital engagement was the “Plan B”. Today wealth managers are forced to not only innovate but to transform by revising digital strategies—along with the corresponding tools and technology—in order to adapt to the shift in circumstances. Digitally empowered human interaction is now the default “Plan A”. Being innovative via digital means, doesn’t equal less human touch. WM customers are typically complex in their nature, they have large households and center of interests, with many cross-jurisdictional nuances and impacts. Hybrid models are going to be crucial to be able to deliver that high touch service that’s core to the WM industry, across whatever type of channel and journey customers are going to choose.

Joe Norburn, CEO, Recordsure: The global pandemic accelerated the deployment of new technology-led solutions that enabled financial services organizations to ensure business continuity and remote-working management. Despite the swift introduction of these solutions, innovative technology tools, such as client interactions monitoring and regulatory compliance management, are proving to drive operational efficiencies and excellence—thus are here to stay. The next challenge for organizations is to carefully assess their new technology portfolio and ensure true alignment with long-term technology and business strategy.

Manish Moorjani, Senior Director Product Management, Publicis Sapient: The pandemic made digital the only mechanism for advisors and their clients to engage; it accelerated digital tool adoption by advisors who felt their HNW/UHNW clients only wanted an in-person white glove service. As we go back to a new normal world post-vaccination, we expect that the engagement model will continue to be a hybrid of in-person and digital engagement as both clients and advisors saw significant value at limited to no degradation of service. In fact, it provided an opportunity to share much richer insights for them to discuss and led to engaging conversations.

The Next Generation Investor: Meeting changing investor needs and expectations

What key shifts are you seeing in investor expectations, behaviors, and priorities? How are these playing out by wealth, age, education, gender, and other investor demographics?

Sabrina Bailey, Global Head of Wealth Management, Refinitiv: Investors expect to be known. Companies like Netflix and Amazon are leading the way in terms of personalization and understanding what their customers want by leveraging the data available and providing personalized recommendations through a simple, intuitive digital interface. Expectation for daily, personalized, and tailored interactions are moving into the financial services arena at a faster pace than ever before. Investors expect that the advisors know them and can recommend solutions to meet their needs based on understanding “clients like them”. Breaking these expectations down by wealth, age, education, or gender is a precarious game given that expectations are also driven by stage in life, income, place of residence, engagement preference, risk level, etc. For example, my high school two daughters have been exposed to investing their entire lives because of my career. Our oldest daughter (persona: The Protector) is conservative by nature, would prefer to meet in person, and would invest no more aggressively than a moderate risk portfolio. She cares more about protecting her money than making the most she can. Our younger daughter (persona: The Thrill Seeker) would invest straight off Instagram, never talk to an advisor and invest in the highest risk single stock she could find because she loves the thrill of the chase even if it means losing everything. Given the move to personalization, wealth firms would be well served to understand their investor personas and adapt both sales and customer service techniques to meet their personas.

Olivia Fahy, Head of Culture, TCC Group: Socially responsible investing is an increasing priority for investors. For firms, this means investing with purpose. Younger investors are particularly concerned about investing responsibly, and so this new trend is set to influence wealth and asset management firms’ culture and their approach to investment—especially as wealth begins to transfer from baby boomers to millennials through inheritance. It should be noted that this shift has been growing in importance over the last few years, but it has been brought into sharper focus more recently by topics like climate change, the BLM movement, and the pandemic, highlighting how firms are part of a much broader infrastructure. Progressive and purpose-led organizations have been shown to be best placed to respond to this pivotal shift in the market and steal a march on their competitors.

Manish Moorjani, Senior Director Product Management, Publicis Sapient: For millennials across wealth, education, gender and demographics, omni-channel engagement is an expectation, not just a “nice to have” anymore. Priorities now include doing more sustainable investing (ESG) to ensure that there is a broader picture in mind besides making returns. They also have a shared control behavior in terms of making investment decisions as they are exposed to lot more information and insights and are looking for a partner not just an advisor.

How is your organization adapting its products and services to meet evolving investor needs? How will value propositions, investor experiences, and market approaches need to change?

Sabrina Bailey, Global Head of Wealth Management, Refinitiv: We are focusing on developing and using digital tools and solutions to address changing investor expectations by delivering the data, insights, and capabilities that can be delivered in a personalized way to a broad range of personas to enhance the overall experience.

Joe Norburn, CEO, Recordsure: The new way of interacting with clients via multiple communication channels requires more transparency than ever before. The fast changes to business operational models have emphasised the need to fast-track the deployment of analytics tools to monitor, analyse and review all client-agent interactions at scale. This requirement is critical as firms are faced with the responsibility to ensure fair treatment of clients, be vigilant to vulnerability, and to always maintain supervisory oversight and regulatory compliance across all communication channels.

Anna Szterenfeld is Director of Editorial Operations for ESI ThoughtLab. She is a multilingual writer and editor with 30 years of experience assessing and forecasting global political and economic risk, policy trends and business operating conditions, with a particular focus on the Americas. For many years she served as Regional Manager and Latin America Editor with The Economist Group, where she supervised analysts and editorial teams in Mexico, Brazil, London, and Gurgaon (India), as well as a contributor network in more than 20 countries.