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2017 Tech Trends to Watch in Wealth Management

CEB TowerGroup recently released a report on the biggest technological trends occurring within wealth management for 2017. The industry push towards adopting fresh technologies is driven by a culmination of factors like slowing AUM growth, increased regulation, fee compression, and a major shift in client demographics and behavior. Because of these tougher market conditions, pre-tax profit margins fell from 31.8 percent in 2013 to 27.6 percent in 2015, according to CEB.

Regulatory costs are something to which firms are paying particular attention, as CEB notes that strategically responding to regulation ranks third among surveyed executives, at 77 percent, as an important or extremely important issue in the next 6 to 12 months. While addressing rising costs is top of mind for firms, so too is their source of AUM growth. The deterioration of brand loyalty and desire for valuable digital experiences among younger generations, specifically Millennials, has left wealth managers with a serious challenge in attracting new high-net-worth individuals to invest with them.

CEB found that 44 percent of those clients consult with four or more institutions for financial guidance, with one in five already using or planning to use a robo-advisor this year. To help prospect younger HNW individuals, firms are recruiting their millennial peers, as 53 percent of executives surveyed by CEB said the development of next generation talent was a strategic objective for the coming year.

Offsetting Regulatory Costs

What was once the seemingly cosmic breadth, and subsequent returns, of wealth management firms has been increasingly constrained by regulation. Advisors can no longer allude to being financial genies courtesy of the DOL’s new fiduciary rule; and firms can no longer afford to incur compliance costs without turning to technologies to alieve some of the burden. CEB found that the top two forces impacting strategies are regulation and cost pressures/efficiency. In fact, in terms of year-over-year expenditures, 23 percent of respondents said compliance costs increased between 10 and 25 percent from 2015 to 2016; 31 percent said they increased more than 25 percent.

CEB believes that leveraging technologies that can automate processes, aggregate data, and track advisor activities and content delivery will not only reduce a firm’s regulatory expenses, but also provide additional value in the forms of greater operational efficiency and more effective client targeting.

Integrating Digital Services

Two more tech trends, when combined, provide advisors with the tools necessary to seize upon AUM opportunities among HNW individuals. CEB says that while 69 percent of those investors use two or more firms to manage their wealth, 41 percent of advisors actually have no consolidated view of their clients’ assets internally or externally. CEB believes this gap in holistic advisory services can be closed by adopting a highly integrated CRM system. They learned that 63 percent of high-CRM-use advisors were high holistic performers, and of those with low CRM usage, just 38 percent reached such a threshold.

CEB states that “a successful CRM system enables wealth firms to holistically and efficiently engage with clients through integrated information management, advisory support, decision assistance, and enterprise oversight capabilities.” To further complete such a seamless, end-to-end view of a client’s journey, data aggregation and automation technologies that integrate across CRM and marketing automation platforms should also be considered by proactive firms.

The implementation of a CRM solution takes another step in what CEB emphasizes as the “integration and expansion of digitalization to improve client-advisor interactions.” Leveraging technological tools that enhance clients’ digital experiences will only strengthen their loyalty, especially where Millennials are concerned. In terms of the importance of an advisor’s access to industry-leading tools and technology, CEB found that 72 percent of HNW clients viewed that capability as very or extremely important.

In ranking the priorities for a loyalty-driving experience, individuals placed effectiveness of advisor guidance using said online tools and resources at the top, with the quality of online account aggregation capabilities second. Simply put, the adoption of integrated digital platforms and processes is imperative to delivering the level of service clients expect in today’s highly collaborative world.

Clients of CEB can access the entirety of the report here, but at first read, it appears that wealth management firms may be turning the corner in terms of technological proficiency in 2017. That is positive news, as they can’t afford to stay where they’ve been much longer.

The Tech Stack for the Fiduciary Era


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