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DRIVING DISRUPTION

Remodelling Singapore’s wealth management industry

In the race to deliver total financial solutions and advice to clients digitally, private banks will do well to manage digital transformation as a strategic risk

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PRIVATE wealth in Asia is growing and will continue to grow. Over the next twenty years, Asia will also see inter- generational wealth transfers taking place on unprecedented magnitudes.

With the increasing digitalisation of the lifestyles of Asia’s well-heeled, there has been a corresponding rise in expectation on their wealth advisers to provide personalised financial advice and solutions based on their life goals and preferred modes of engagement. Several studies have shown that many of Asia’s high net-worth individuals (HNWIs) will consider leaving a private bank if digitalisation is not a core part of its offerings.

Rising to the challenge, many private banking chiefs have made public statements about the need to transform and digitalise their organisations to capitalise on this growth and acquire the next generation of customers arising from wealth transfers. The transformation often starts with the client in mind and usually has a big technology component. But the clients and their needs are soon forgotten even before the ink on a vendor contract is dry. This is an irony in an industry that prides itself as a people business.

To be sure, no private bank would deliberately neglect its clients in a transformative effort. But the reality is that these changes are often so large- scale, complex and disruptive that it is extremely easy for the bank to lose sight of their clients’ needs mid-stream. Therefore, as much as transformation is about creating value, it is also critical that the risks are identified and managed closely.

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Private banks need to continuously take stock of its transformational change agenda to ensure that their clients’ needs are met. This is a strategic risk that needs to be managed actively, as failure to do so may result in the loss of competitive advantage and strategic failure.

Recognising the strategic risk

Digital transformation has become a strategic imperative for three reasons.

Firstly, more than ever before, technology has become a strategic enabler that enhances relevance, trust and value to a wealth management relationship. These are the three key ingredients in the wealth management industry that transcend age groups and wealth segments. It is not difficult to imagine a near future where all your financial details are available at the touch of a button on your mobile device, enabling a meaningful conversation with your relationship manager in cyberspace.

Secondly, it is an inevitability that wealth will be transferred to millennials who grew up in a digital era and need to be engaged digitally. These millennials do not draw clear lines between digital and offline interactions as the older generation does. Private banks that do not invest in digital engagements will perish.

Lastly, new entrants to the wealth management sector, such as financial technology firms (fintechs) and Big-Techs, approach wealth management in a totally different way. They exist to solve problems in the industry and in so doing, they create fundamentally new solutions. For example, there are fintechs that solely focus on solving the data aggregation problem so that HNWIs can get a holistic view of their wealth, and others that have quickly evolved from an e-payment platform to a wealth management partner that offers more than 4,000 wealth management products in China. Although these new entrants do not compete head- on with the private banks today, private banks cannot afford to be complacent.

The long-held view that regulation creates a high barrier to entry is gradually giving way to an eco-system view where private banks will do better for their clients and for themselves to harness the innovations and technology already developed and deployed in the market.

Approaches to digital transformation

The digital transformation journey is fraught with challenges, especially when the industry is transiting from a “high touch” model to a “high touch, high tech” model. To lead digital transformations that will yield new capabilities and grow revenue, leading private banks will need to undertake three shifts in their approach.

First, they will need to reframe the transformational goals into specific and measurable outcomes for the clients in simple language. It is all too common to see transformation projects being executed and measured based on project objectives that bear little relevance to their clients.

A desired outcome would be one where the clients are able to access their portfolio performance, receive personalised investment offerings matched to goal/risk profile, and compare products and fees, all through their mobile and other portable devices, anytime and anywhere. Compare this with a project objective of delivering a mobile platform with a suite of functionalities in three months.

The former approach is done through the client’s lens and the latter is done through a typical system development approach lens. This disconnect often happens when there are too many project objectives with no robust measures of success. Before long, the clients’ needs are lost in translation. Is it any wonder that clients often lament about poor client experience despite the millions spent to improve it? The clients would not care whether their private bank employs artificial intelligence to curate investment ideas of interest; neither would they care whether optical character recognition is used to auto-fill forms. What is of importance is their experience and the outcome.

The second shift is about monitoring the progress against the outcomes. This is why the outcomes would need to be clearly defined with realistic measures attached to them.

Finally, the executive management team cannot underestimate the importance of ensuring the users’ readiness to embrace the digital transformation. A bank can have the best digital capabilities and tools delivered but without the full buy-in of the users – both internal and external to the bank – the benefits can never be fully realised.

Banks undertaking a transformation journey should bring all the relevant stakeholders along by continuously assessing readiness and adoption levels throughout the journey to be kept abreast as to how the changes are being received. This will help to pre-empt any potential roadblocks upstream rather than when all the costly changes have been put in place.

Digital wealth management transformation is a strategic opportunity for new growth but can also present strategic risks when not executed properly. A private bank that leaves its clients behind in its digital wealth transformation will soon find that it gets left behind by its clients too. W