What will it really take for wealth management to transform digitally?

Despite being plagued by legacy technology, the wealth management industry foresees a digital-first transformation in the near future as advisors and investors alike demand a greater high-tech, high-touch experience. 

Actually getting to that point is a different matter.

According to Broadridge's 2023 Digital Transformation and Next-Gen Technology Study, which surveyed 500 C-suite executives and direct reports, over half (55%) of wealth management firms say that digital transformation is now their most important strategic initiative. However, many firms struggle to balance innovation with day-to-day business priorities and are grappling with creating a clear digital vision and implementation roadmap. 

The cost of getting this digital transformation wrong is clear — loss of revenue. Broadridge's 2023 CX and Communications Consumer Insights report found that 65% of consumers want the companies they do business with to improve the digital experience, up 5 percentage points from 2022. Additionally, the same percentage stated they have cut spending with companies that don't meet their CX standards. This is further supported by McKinsey, which found in a January 2023 report that despite the investment by traditional firms, digital-direct firms captured approximately 41% of total net flows for the five years through 2021, growing their share assets from 21% to 27%.

While loss of revenue should be enough to motivate wealth managers and their advisors, market volatility puts further pressures on the need to reduce expenses. Smart transformation will position firms to achieve lower run-rate costs, increase scalability and, most importantly, define a competitive edge in the market. 

Ensuring that wealth managers have established a solid foundation is essential. This requires a mix of projects designed to remove friction, making it easier for clients to do business with advisors and giving the teams the tools to service their clients. There are three areas where firms can achieve this.

Modernize your ecosystem
C-suite executives across financial services sectors cite the impact of legacy systems as the top challenge to their businesses — and where they are investing the most resources. Broadridge's research reveals that nearly three-quarters of firms classed as digital leaders are at an advanced stage of replacing legacy systems with a cloud-based infrastructure, demonstrating the investments that firms are taking to modernize their ecosystems in order to further their digital transformation goals. However, no matter what the investment, firms who are working with a defective foundation will find it nearly impossible to achieve their business goals. In order to overcome this hurdle, firms should consider these key points: their strategy, planned investment and approach to continuous improvement.

Establish the CRM as the advisor hub
The objective of most front-office positions is relationship management and business development — tasks that require team members to spend most of their day in the CRM. The more functions they can do within the CRM, the more efficient and effective they can become.  The deployment of Open API architectures makes it easier to extend processes to other applications. Allowing for tasks, such as cash disbursements, maintenance of demographic information and client onboarding, to be initiated in the CRM avoids the need to toggle through applications, reduces duplicate entry of data and improves the quality of information. Some have even broadened the role of the CRM to include aspects of financial planning, risk management, and compliance. 

Elevate experiences by delivering personalize content 
Investors are expecting their advisors to engage on an individual level. They have given their advisors the information needed to develop strong client profiling tools to deliver the experiences they want. However, advisors still struggle to deliver this experience as Broadridge's research shows that roughly half of organizations do not share educational content with clients and prospects.They cite lack of time and uncertainty about the best approach as the top reasons they rarely or never share content. 

This leads to a lost opportunity for advisors to show their value. Artificial intelligence (AI) can be leveraged to overcome these challenges, as it has the ability to guide advisors to provide the right message at the right time, considering generational and gender differences in investors, and then provide clients with the information they need. AI can also help personalize the delivery of investment products, as according to the CFA Institute, 62% of investors would like personalized products and are willing to pay additional fees for them.

Using these areas as the foundational components for a transformational plan is the next step to maximizing wallet share and capturing the next generation of wealth.