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Digital & Technology

The Brave New World of Digital and its Place in the Wealth Management Universe


Dec 20, 2019

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Setting the scene for the day at the Hubbis Digital Wealth Asia Forum, an eminent panel gathered to cast their expert eyes over the world of digital technologies and how they are affecting the wealth management universe, as well as the broader realm of financial services. From digital onboarding to machine learning and AI, from cryptocurrencies to blockchain, from KYC to KPIs, these experts pondered whether digital evolution is being properly embraced, and if not, who might get left behind.

The Panel’s Key Observations

The world of technology is more collaborative than the world of wealth management

Whereas in private banking and wealth management there remains a very considerable degree of secrecy, in the world of FinTech, there is greater openness, as technology moves so rapidly that in the blink of an eye, things can change dramatically.

There is a robust effort being made towards technology as the enabler

Ask not how you can plug technology into your business, but how you can plug your business into technology. In other words, wealth management businesses must view tech as the enabler of business transformation, and then the mission must be to continually upgrade and to stay relevant.

Advice must be core to the delivery of value-added propositions

Advice must henceforth be embedded in the overall proposition, so the product comes with context, and so that the wealth industry can demonstrate value.

Relevance is the opposite of obsolescence

If you are not relevant to your clients, you run the risk of becoming obsolete. The way people consume financial services is being disrupted by technology, and providers of wealth advice and products must remain constantly focused on the client, with digital at the core of their offering.

Adoption internally is essential to achieve adoption by the clients

Transformation is from within. The firms that achieve internal adoption of digital transformation stand a far greater chance of achieving adoption by their customers. Those firms whose teams recognise this collective value and the benefit to their financial institution will perform better and transform more effectively.

Digital can enhance segmentation

Only the truly upper echelons of HNWIs and ultra-HNWIs will in the future enjoy face-to-face rapport with the relationship managers. Wealth management firms must segment their client bases in order to provide to them what is viable from a cost and resource perspective. Digital will help analyse such segmentation and deliver solutions to the lower tiers of wealth.

Don’t forget about RegTech

As digital transformation takes place, firms must remember that at every stage they must be compliant.

Be realistic, and be flexible

It is virtually impossible to imagine a perfect solution right from the start, and therefore customer testing and feedback is essential throughout, and then gradually roll out solutions that work. And then adapt continuously to stay ahead of customer expectations and competition.

Data must be carefully managed and brilliantly exploited

Data is the new oil, or so the saying goes. The banks that house much of this personal and customer data must of course be cautious above cyber-security, but they should also recognise that data can also be sensibly exploited to light the path to future revenue streams and opportunities.

Technology can greatly enhance the abilities of the RMs

For those private banks and others typically dealing with USD5 million of assets and above HNWIs, it is essential to leverage tech to help RMs work more efficiently and boost their revenues, and thereby the profits of the firms they work for. Technology can significantly augment the ability of the RMs, help them become ubiquitous, mobile and to offer instantaneous dissemination of ideas and products, while cutting their time spent on administrative matters.

Timely exploitation of digital delivery

Time to market for digital enhancements is vital for businesses, and then further customisation will be required as well. Too many RMs are frustrated with their own firm’s technology, so there is still a big gap as the technology available today so often far surpasses the technology that most of the financial services firms have in hand. Moreover, legacy systems and legacy mindsets often stand in the way of true progress. But those that can adopt, adapt and move fast are well set to win.  

Specialisation will be more prominent

With pressures on costs and on skills and resources, there will be greater specialisation within private banking and wealth management, and as this takes place, there will be increasing outsourcing of technology and other services non-core to the private banks and other wealth management firms, thereby allowing management and capital to be focused on adding value, expressing core values and achieving core differentiation.


The Discussion

“Well, the first big change in going digital,” a guest said on opening the discussion, “is for me no more suits and shaving only once a week! But seriously though, what I have learned in moving from private banking to a digital start-up is collaboration is much tighter, and even your toughest competitors can teach you how to do things. In banking we compete, we don’t really work together, we keep our secrets to ourselves. In the digital economy it is a lot more open, probably friendlier.”

Another guest explained that his firm’s strong position in the world of wealth management was being used to help the so-called ‘traditional’ wealth management firms transform their businesses through technology. “We provide products, services, and solutions, and over the past three or four years we have extended that value proposition to incorporate what I can broadly say is wealth technology. In this region, we are very focused on trying to work out how we can help these firms make that transition, especially as they move between legacy and new tech, and towards a true advisory proposition, rather than being heavily transaction based. Technology is not the catalyst for change, but certainly enabler of that transformation; that’s where we are focused.”

The interplay of advice and value

He added that as this happens, the notion of advice will need to be represented as value for clients, much as has happened already in Australia, where there is a very well-developed advice industry and clients are expecting not just a product but also an advice proposition.  “Here in Asia the direction of travel is slower, and the industry must communicate more values to clients than just access to products. That’s where the advice proposition needs to evolve. It is not about price; it is about value; helping clients understand the value of that service.”

Another guest remarked that the mission for private banks is not to actually integrate digital into banking, but rather to integrate banking into digital. He advised that the key is to establish the baseline, continually upgrade and then stay relevant.

Be relevant

“Relevance,” he explained, “is really defined at the highest possible level to be part of everyday life, if not that, you are going to be running the risk of becoming obsolete. Accordingly, the agenda is never-ending and of course the agility of representing the value proposition needs to be handled at a very high speed. What keeps us alive in this journey are two things – first is the necessity to stay relevant because the way people consume financial services is being disrupted by technology, and the second thing is to be aspirational and ambitious. So, you need to build an agile way of thinking around software development and platform delivery, and finally, be absolutely obsessed with being client-centric because we build all this around the client, and through usability testing.”

He added that success will be defined by adoption. “Optimal internal adoption means you can move an organisation. Our technology now in terms of adoption is in excess of 60% of the clients using it, and more than 50% of the trades which are actually done online, and we are developing self-servicing at all levels. So, success is really defined by internal adoption, shifting the way we deliver service and value and eventually by usage.”

Segmentation is the future

From the value and pricing perspective, a panel member advised that there is a move to segmentation because margins are going down and not all clients can in the future have access to a very expensive RM. “For some clients,” he observed, “especially the smaller ones, the self-servicing mentioned earlier is very important to bring down costs, while for larger clients with more complex needs the RM can still add a lot of value, but needs more skills, they really need to understand their clients’ families, their real needs and at the end of the day the whole conversation is about the value they are providing that is clear and transparent to clients, leading to a higher likelihood that they will pay properly for these services.”

Another expert concurred with an earlier view that the transition required is not to just bring digital into your business, but to make your business more digital. “This is quite a revolutionary change,” he commented, “and you must also be compliant with all regulations, and in the arena of new technologies, blockchain, smart contracts, artificial intelligence, big data, privacy, cybersecurity, these are all getting incorporated into the new systems and require compliance, especially around your customers’ data. Where is that data stored? Who can access it? All very important, especially if you have EU customers, you must comply with the GDPR – the General Data Protection Regulations which came into force last May. If you breach that, it is possible that it is 4% annual turnover as the penalty or EUR20 million, whichever is higher. That is harsh penalties ahead so you must ensure that you have a proper data design, data safety or security design in place.”

Identify your goals

Another guest observed that it is essential to identify the segments in the wealth spectrum the provider is aiming to service. After that, it is vital to understand what value technology brings to the organisation. “Is it about driving bottom line or is it about enhancing customer experience?” they pondered. “Is it about customer retention? The different stakeholders within the organisation need to all come together and recognise this collective value and the benefit to the financial institution. That is the key step required to then embark on a very cohesive and supportive implementation.”

They added that it is nigh on impossible to think of a perfect solution right from the start, and therefore customer testing and feedback is essential throughout. “The bigger organisations, however large they might be, can take a very simple approach, identify the customer’s needs, figure out a simple solution that can address it, then implement it.  Time to market is very important because things might change, so get to the market, use your customer’s feedback to enhance your product. That’s where we see the success of digital implementation.”

Data mines

A fellow panellist took up the point on data, noting that while many private banks and others fear using data, digital is everything around data and it is vital to efficiently and compliantly use data on clients. “For instance,” he said, “your clients travel often let’s say to the UK, maybe they have a house in the UK, maybe they need a mortgage, maybe they have a mortgage, maybe we can help them hedge the interest rate risk that they have on that mortgage. It is difficult to sell a new idea to the client, but if the client already has a position it is a lot easier to talk to him about the position that he has, and then what he might be able to do. It is vital to monetise data; it is a great opportunity.”

“Yes,” another panel member agreed, “it is about balance, being aware of the risks and opportunity. By having a system in place, privacy by design, you at least get all the proper consents, and then you can use the data, because ultimately the future of the world is data, data is digital gold and we have to use it in order to make money and so we just need to make sure that we have a system in place for safe use.”

The yin and the yang

“Yes,” a panellist agreed, “the opportunity is how to use digital strategies to bring your costs down and how you can also use digital to increase your revenues. The challenge and the opportunity.”

An expert noted that his firm’s internal research had shown that over three years, there was a revenue margin decline of 5% for the private banks they looked at.  “Why?” he pondered. “The revenue mix of the bank shows about 40% of the revenue is lending and another 40% to 50% is transaction fees and that’s currently the problem because that’s where most of the compression is happening. To stop this revenue erosion, banks need to improve on the discounting, need to make sure that clients use cost-efficient channels. That is the short-term tweaking, but in the longer run, it is about how the banks manage to transform the revenue mix, either into recurring fees or more mandates. And then increase the non-banking revenue, create ecosystems, come out with revenue sharing models, and so forth, to complement existing revenue streams.”


Another specialist agreed, adding that too many private banks are not quite sure why they are in the business. “If you do not have a strategy that positions you in a given segment, given businesses, and if you want to be everything for everyone, you are going to be in a difficult situation because the cost of doing business is extremely high, especially in the last five to 10 years.”

He advised that banks should focus intensely on productivity per RM to boost their bottom line. “It is also about trusting the advisor who will deliver value to the Asian entrepreneur, as 80% of the wealth creation is first-gen or second-gen in this part of the world,” he commented. “To be the trusted advisor, you need the ability to advise on corporate wealth as well as on private wealth, and to do that you need an organisation where you empower the management to actually take the walls down across businesses. It is about capturing growth while it is originated and accompanying the needs of the clients along the cycle. However, this means a different model as the banks are vertically organised with massive amounts of silos. But, you need to be client-centric in terms of knowing how to extract value because you can identify the needs and then engage, and here is where technology matter so much, as we need to augment the ability of the RMs, to help them become ubiquitous, mobile and to offer instantaneous dissemination, to cut out much of the administrative burdens, to help them then add value.”

People will pay for value

He concluded his point by observing that people will continue to pay for value, people will pay for orientation, people will pay for advice but you need to capture more conversations and more needs in a single interface, so that you extract actually what makes the bank differentiating and thereby profitable and sustainable.

A fellow panellist added that as to technology implementation, both time to market and then customisation are essential in helping such clients achieve their digitalisation goals efficiently and effectively.

But the word ‘digitalisation’ is open to misinterpretation, another panellist remarked, noting that data can actually be a major inhibitor to delivering a seamless experience.  He said his firm sees most RMs in the banks as, frankly, frustrated with their own firm’s technology, so there is still a big gap as the technology at their reach far surpasses the technology that most of the financial services’ firms have.


He added that successful delivery will also require intra-operability, so more and more services will be delivered through API, and ultimately the firm that is controlling the client relationship would want to enhance that user experience, so any technology solution has to wrap into that.

He also added that it is important to focus on EAC – Engagement, Adoption and Commercialisation. “Unless the firm is getting true value from whatever they are doing it will ultimately not get used,” he warned. “But if you are focussed truly around engagement, adoption and commercialisation, you will get more success.”

“The banks’ legacy systems, which frankly hardly talk to each other, is another major problem,” came another opinion. “It is extremely complex to deal with these legacy systems and all the data problems involved. That’s where maybe new competitors have an advantage, because of course they are starting from scratch.”

Moreover, he warned that for the banks, adoption of the technology needs to happen first internally, before the client will adopt it. “That means,” he stated, “a massive effort of re-educating RMs around being augmented for the service that the technology will provide. And as to the client adoption, the journey towards this adoption is very painful, it requires a massive amount of attention and investment, and believe me, the hurdles on the way are just phenomenal. The last mile is where the banks so often have significant issues because they under-invest in the last mile, which is adoption.”

A guest then took the point further, talking about the concept of digital identities. “People having full control of their old data in an open data economy, that's where our world is heading,” he said, “and that must be quite a terrifying prospect for traditional institutions, while for others it is obviously a great opportunity to help with that.”

“I agree,” came the final comment of the discussion, “but actually  these heavyweights that exist now they actually have an advantage, they have resources that start-ups don’t have, they have a platform, they already have a clientele in place. There are a lot of things to make use of, so then it is about how to digitalise the existing industry and make sure that the legacy transitions are smooth, as cost-efficient as possible, take an agile approach to look specifically at data, decouple it from everything, deal with that data and then also deal with the whole system, because ultimately data permeates throughout the industry, and within that, it is essential also to set up the compliance of the data at the onset as well when you are changing your system.”

Pressures lead to specialisation

There were then a few final comments from the panel to wrap up what was a fascinating discussion. These included the tougher market conditions expected in the foreseeable few years ahead, with continuing pressure on margins, leading to even more pressure to adopt technology and change. Another comment was the reiteration of the vital importance of internal adoption within organisations that must have a culture of supporting change and adapting continually to change. Another guest said the migration of wealth management onshore is a key factor, especially for markets such as China, and also the next-generation focus is vital, as their thinking and digital adoption is very different from the generations that currently hold the wealth in Asia. And there will also be a greater specialisation within private banking and wealth management and related to that increasing outsourcing to allow management and capital to be focused on core values and core differentiation.