Innovations within FinTech are causing major changes to the dynamic between clients and wealth management providers. With technology as a driving force behind industry changes, understanding how client perspectives are shifting is crucial.
For the wealth management sector, there are three key innovations that institutions need to be paying close attention to. These are artificial intelligence, open banking, and agile distribution. Understanding these will be the foundation for meeting new customer demands in the coming years.
Having a strong comprehension of new technologies is the key to both onboarding new clients and retaining existing ones. In this article, we will discuss each of these innovations and how they will affect how clients view wealth management.
Changing client expectations are affecting the wealth management industry in two key ways:
- Digital Services: Customers have come to expect more – if not total – digital services from their financial institutions.
- Affordability: Customers know that technology can decrease costs. Thus, they expect institutions to offer services at a lower price point, demanding more for less.
With these two key factors in mind, it has become increasingly difficult for wealth management providers to stand out amongst their competitors.
Enter artificial intelligence – advanced machine learning and processing that can greatly aid in all aspects of financial business. AI holds many important capabilities for wealth management, including:
- Compliance and Risk: AI can handle large quantities of both structured and unstructured data. Through this, wealth management providers can drastically improve analytical models to better manage risk and meet regulatory requirements.
- Improved Decision Making: All financial institutions can enjoy heightened accuracy and improved decision-making thanks to the predictive technology of AI.
- Automation: With AI, many highly necessary processes can be automated. This frees up a lot of time for a wealth management team that can then be reallocated towards improving the customer experience.
Additionally, AI can benefit the quality of client interactions. With AI, wealth management providers can greatly increase the level of personalization that comes with their services.
Accelerating the Benefits of AI
Artificial intelligence is still a relatively new innovation being put to use within the wealth management space. As such, institutions must work diligently to ensure they are not only experiencing the full breadth of benefits but accelerating those benefits as well.
The following three factors are majorly helpful for wealth management businesses looking to incorporate AI:
- Setting Clear Goals and Business Strategies: To find success with AI, it is crucial to have a clear outlook on what goals a business is aiming to accomplish. Taking a thorough stock of existing technologies and where AI can be most effectively used is key.
- Deploying AI at Scale: Scalability can be a huge roadblock for AI when not properly accounted for. For any institution implementing AI solutions, the AI needs to be deployed at scale to enable all members of an organization to utilize it for optimization,
- Taking Advantage of Automation: By taking advantage of AI’s capability for automation, wealth management teams can spend more time acting on real-time data and insights.
One of the major innovations currently taking the financial industry by storm is open banking. The term refers to the processes carried out by banks and financial institutions to provide customers with easy sharing of financial data.
With open banking, a financial institution enables financial information to be shared electronically and securely according to the preferences of the customer.
Open banking is undoubtedly the future of finance – but what does it mean for wealth management?
There are three key benefits of open banking for wealth management to consider:
- Secure Payments: Improved payments and payment processing are driven through open banking. The simplification of payments is enabled by open banking through highly secure and speedy processes that can also cut back on transactional fees.
- Optimized Onboarding: Having a strong system for user onboarding is essential in the wealth management industry. With open banking, many of the onboarding processes such as KYC requirements and credit checks can be fulfilled instantly. This speeds up the overall onboarding process, eliminating friction and increasing customer conversion rates.
- Real-Time Accessibility: With the consent of the customer given, open banking allows wealth management professionals to access the financial information of their clients in real-time. This helps greatly in improving the customer experience by enabling greater personalization and better insights.
Enhancing the Customer Experience
Open banking is still a new concept to most consumers. Because of this, highlighting how it can enhance a customer’s experience is key for widespread consumer acceptance.
To boost customer acceptance of open banking, emphasizing the benefits on the customer-end is essential.
These customer-side benefits include:
- Co-Creation: Co-creation is born out of improved relationships and communication between financial institutions and customers. This can enable customers to have a hand in the designing and customization of services.
- Banking as a Service: Open banking allows customers to shift the way they view banking and wealth management. Rather than viewing it as an in-person institution, customers are granted greater freedom and control over their financial services.
- Simplified Money Transfers: For customers, open banking is the key to faster payment processes and greater overall satisfaction. Open banking helps customers to unify their many financial accounts to make transferring funds easier than ever.
As the wealth management industry enters into a new era of technological disruption, innovations in distribution models are highly necessary.
Agile development and distribution are often seen as the key to meeting the changing demands of both markets and consumers. Created by a collective of software developers, the Agile methodology focuses on collaboration and continuous development.
Benefits of agile distribution for wealth management include:
- Boosted Productivity: A distributed agile approach, consisting of both onshore and offshore teams, enables a major boost to productivity. This is thanks to having team members in many locations and countries, essentially allowing for round-the-clock service and work.
- Decreased Development Lifecycles: Agile is a key enabler for cutting down on the time it takes to develop applications and software. In turn, business projects and communication can improve significantly in terms of both efficiency and collaboration.
- Maximized Return with Minimized Risk: With agile distribution, wealth management providers can focus on both maximizing return and minimizing risk according to the client’s return requirements and preferences.
In the coming years, the three innovations discussed here – AI, open banking, and agile distribution – will reshape wealth management as we know it.
Technology only continues to spread across the financial industry. As it does, clients are growing more and more accepting and expectant of digital services and solutions. To meet these changing client demands, wealth management providers must embrace digital transformation.
Digital transformation is the process of shifting traditionally in-person services into fully digital and remote processes. With the correct application of digital transformation, all the necessary technologies can be implemented across the board within a wealth management business.
Here at CPQi, our teams are experts in digital transformation. We provide everything you need to meet the shifting expectations of customers, including building systems that support the three key innovations discussed here.
To learn more or to begin your institution’s digital transformation journey, contact CPQi today.
Written by Ilyas Moumane.