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Transforming private wealth management
WHILE the Fintech industry is increasingly gaining recognition, most of its impact has largely been felt in financial services catering to the mass-market segment. That is the obvious play for them as they need to prove scale and relevance. But while it is often perceived to be a threat to the traditional financial players, its impact in the private wealth management space isn't significant yet.
At the moment, Fintech's thrust into wealth management has primarily focused on the use of algorithms and data to predict patterns for investors. This is largely seen in the rise of Robo-Advisories. While Western Robo-Advisories have predominantly focused on the mass market, there's been a growing number of Robo-Advisories in Asia.
Unlike their Western counterparts, these services have been targeted at high net worth investors with traditional wealth advisory practices integrating these systems into their own platforms. Still, their presence is limited due to different regulations across the region and they have yet to prove just how profitable they can be. But that does not mean that private wealth management companies can afford to ignore Fintech and innovation.
Clearly, the rise of Fintech is transforming how finance and banking is done and it will eventually evolve enough to impact private wealth management more significantly. So what can it do now to innovate and respond?
Focus on needs first then technology: It's easy to get distracted by this wave of digital platforms and technology. But the fallacy of doing so means that wealth managers may end up missing out what clients are really looking for.
This is where wealth advisers have been excelling, advising clients on a wide range of complex needs from investment portfolio management to wealth structuring which can include planning multi-generational wealth transfers, and so on. Wealth advisers have done well here because of their ability to create customised solutions and services for each client.
And this still requires the human touch and more importantly, empathy, something which technology cannot offer because they are designed for scale, not individual experiences which the wealthy require or desire.
Too often, private wealth companies have been championing "innovation" in the form of a fancy new digital management system, showing flashy dashboards and reports. Unfortunately that may not be what clients are looking for. Think about it, no one signs up with a wealth manager because they have a cool looking app. Clients have been turning to digital platforms and technology because they offer simplicity, speed, as well as precise and concise information that help these clients make better financial decisions.
By re-focusing on these needs, wealth managers are in the unique space where they can identify which technology solutions can better serve clients.
Collaborate with Fintech to define how technology can transform experiences for private wealth management clients: Because wealth managers are in the unique space to provide advice to their clients, they are also in the unique role where they can define how Fintech can evolve to better serve private clients.
Wealth managers have built up considerable experience in learning how to deal with regulations and can lend that knowledge to help the Fintech sector navigate around these. Furthermore, the client data they have established can add value to how new Fintechs develop to create more sophisticated solutions and better serve private wealth clients.
WEALTH OF KNOWLEDGE
The point here is while private wealth management players have often been perceived as slow and unresponsive to technology and changing client behaviours, the wealth of knowledge that private wealth managers have built can lend considerable insight into how Fintechs can develop for the private wealth sector. This means creating a collaborative ecosystem to outsource certain development needs to Fintechs which are more attuned to the technology, while private wealth managers can continue to focus more on client needs. This requires opening up the industry which is also known to be highly secretive due to the sensitive need to protect client information.
Over time, as greater collaboration is fostered between private wealth companies and Fintech, wealth managers will be better able to identify and tap into new technologies to scale solutions that deliver better results for clients.
Upend traditional mindsets and roles within the traditional private wealth management space: But to get to a stage where private wealth management is better at embracing technology, it must first ensure that it has the talent that is more adequately equipped to handle the new technology available.
This means current hires need to be upskilled. It also means the sector will have to hire people who come from non-traditional banking backgrounds such as data scientists, cyber security experts, designers, behavioural scientists and others, people who are in tune with the digital era and can translate data and information to respond to client needs and the jobs that need to be done.
Private wealth managers will also need to shift their mindsets to where they see themselves as collaborators with their clients. According to Salesforce's 2015 Wealth Management for Connected Investors, more than 50 per cent of Millennials and Generation Xers surveyed said they wanted to manage their investments in collaboration with their financial advisers.
After all, technology is just an enabler, it cannot create an investing worldview from people's needs and goals, or hold their hands to urge them to stay calm in a volatile investment climate. At the end of the day, Fintech and technology are merely side-shows to the evolution of private wealth management. What is important is that the industry is able to innovate the way it fundamentally operates - and that's still more about how we develop systems and processes to better understand people.
- The writer is chief innovation officer, DBS Bank