8 minute read 26 Apr 2019
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How to transform wealth management through digital technology

Firms must keep pace with changing technology by building digital capabilities and transforming their organizations for the digital age.

The strategic and operational effects of digital transformation are gathering pace and will leave no area of wealth management untouched. Our recent study presents the findings of a comprehensive research initiative on the state of technology within wealth management. It identifies digital capabilities that wealth managers need to build and by when, how they can transform their organizations for the digital age, and where they should direct their digital focus.

The operating environment is changing. Technology is lowering barriers to market entry, opening the gates to a completely new set of formidable digital competitors armed with innovative capabilities and intent on far-reaching disruption. Silicon Valley giants and agile FinTechs are reshaping the playing field by elevating the customer experience in many areas of interaction.

Client behavior, too, is changing across all segments. Today’s wealth management clients already expect a seamless customer experience that is fast, convenient and intuitive, and tomorrow’s customers will expect online tools and smartphone-based functionality to be standard.

Through investment in innovation and digitization, wealth managers can not only enhance efficiency through front-to-back automation and leaner processes but also future-proof their businesses by upgrading client touch points and overhauling their value propositions.

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Chapter 1

Digital in wealth management — new capabilities and new questions

The ability to innovate quickly and effectively is turning into a core asset.

The ability to innovate quickly and effectively is turning into a core asset. Examples of digital transformation within wealth management span the entire value chain, from client onboarding to fulfillment and trading. For example:

Client onboarding. In Europe, a wealth manager has launched a service allowing clients to open accounts using videoconferencing. Others are following suit and digitizing the onboarding process using innovative technology, from electronic signatures and online ID verification to biometric authentication.

Advice. In Asia, a wealth manager has introduced a suite of digital banking tools for tablets and smartphones. The app provides personalized content, trading tools and opportunities for multichannel collaboration. This is part of the transformation of wealth management through digital technology.

Sales support. Providers are designing tablet apps to support relationship managers in client meetings by guiding them through a smart, adaptive and interactive sales process, consolidating all relevant sales functions in a single platform.

Investment recommendations. A large global wealth manager has introduced personalized “health checks” that identify potential issues with personal portfolios, offering tailored remedies to bring the health status back to desired levels.

Fulfillment and trading. A number of wealth managers are building digital solutions that provide social marketplaces where customers can trade stocks and funds online.

As digital continues to transform wealth management, senior executives need to ask themselves three critical questions:

  1.  What do clients expect in terms of digital capabilities? Traditionally, wealth managers interacted with clients almost entirely by phone, email and face-to-face presentations. Today, however, a large majority of clients would not hesitate to switch wealth managers in exchange for better digital capabilities.
  2.  What can wealth managers learn from the new digital upstarts? Many of the digital trends are driven by robo-advisors, which are already capturing parts of the wealth management value chain. Incumbents should take the opportunity to learn from the approaches these digital upstarts are taking.
  3.  How can wealth managers benefit from the emerging ecosystems of FinTech providers? FinTechs are proliferating and delivering innovative business-to-business solutions. Many wealth managers are seizing the opportunity to cooperate with FinTechs in building new digital capabilities.

Answering these questions involves reconceptualizing the key roles of client, competitor and service provider to meed the digital age.

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Chapter 2

Meet your new digital client

Most wealth management clients expect digital will be their preferred channel for advice within the next two to three years.

The majority (59%) of the wealth management clients we surveyed state that digital will be their preferred channel for receiving advice within the next two to three years.

Our 2016 survey of more than 2,000 wealth clients globally exposes their preferences in three dimensions: engagement, financial performance and trust. In terms of engagement, clients value accurate information, self-service and digital channel capabilities. Regarding financial performance, they value having a solid understanding of their financial goals and having a broad suite of products and tools at their disposal. And in terms of trust, clients value transparency in fees, transaction security and data confidentiality the most.

Most clients are also familiar with robo-advice offerings. Not surprisingly, younger generations are more likely to consider robo-offerings than older age groups, with 61% of surveyed clients between 18 and 34 likely to consider robo-advisors, compared with 51% between 35 and 50 or 24% between 51 and 71.

Moreover, it is primarily the high-net-worth (HNW) segment that has the greatest awareness of, and preference for, robo-advice, not the mass affluent or emerging HNW segments, as commonly assumed. Over 70% of HNW clients would consider robo-advice, compared with 37% of mass affluent clients.

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Chapter 3

Meet your new digital competitor

Robo-advisors are growing at a rapid pace, doubling their assets under management every few months.

“Automated wealth managers,” or robo-advisors, are an unprecedented force. Using algorithms to offer financial advice for a fraction of the price of a real-life client advisor, they are growing at a rapid pace, doubling their assets under management every few months.

Wealth managers assess clients with a small number of basic questions to determine their investment appetite and derive recommended portfolios. In the case of guided advice, remote advice is delivered over the phone or by video communication. A human client advisor is responsible for the investment advice and typically focuses on a holistic strategy. In all cases, the robo-advisor model is built on three key pillars:

  1. Rapid technology change cycles
    Robo-advisors assimilate and leverage new technology rapidly, especially in areas such as improving mobile app interfaces and using artificial intelligence (AI) for client communication.
  2. Self-service and automation
    High levels of automation and self-service allow robo-advisors to keep their cost base low.
  3. Passive investment strategies
    Robo-advisors focus on passive investment strategies, rather than discretionary decisions. As a result, there is less, if any, need for a human portfolio manager.

Robo-advisors have so far only captured less than 1% of the global market. That said, robo-advice providers are gaining traction around the globe, and they will improve their capabilities and expand.

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Chapter 4

Meet your new digital service provider

Wealth managers must carefully determine whom to collaborate with and how to do so.

Collaborating with a growing ecosystem of FinTech service providers can offer wealth managers the opportunity to reduce costs, comply more easily and effectively with regulation, and ultimately serve their clients better. An overarching challenge for wealth managers is how to “open up” structurally to leverage the evolving ecosystem of FinTech providers. As wealth managers test new concepts and supplement their in-house technical capabilities with solutions from external providers, determining whom to collaborate with and how will be key.

Several forms of collaboration aimed at gaining a competitive edge are emerging. Acquiring a FinTech provides exclusive access to know-how and allows the wealth manager to upgrade internal capabilities. By partnering with a FinTech, a wealth manager can upgrade internal capabilities by jointly developing nonstandard solutions. And funding FinTechs allows wealth managers to benefit from exclusive insights and partake in some level of decision-making.

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Chapter 5

Five tactics to stay ahead of the curve

Wealth managers need to act to avoid losing ground in an era of dramatic change.

Clearly, wealth managers need to act to avoid losing ground in an era of dramatic changes. Taking these five “no-regret” steps can help address these issues head-on:

  1. Define digital objectives and criteria for success.
    Delineate the objectives worth pursuing and how you define “digital success.” Examples could be: increasing client loads per relationship manager by 10%, reducing operational costs by 15% or achieving client satisfaction ratios of 90% with digital offerings.
  2. Determine the broader implications across the business and operating model.
    Successful digital strategies require changes beyond process and technology. Additional areas to keep in mind: client segmentation, governance of digital channels, operational readiness, digital product and service content, and organizational blueprint.
  3. Assess the digital capabilities needed, and prioritize their implementation.
    Evaluate digital capabilities in terms of their impact (e.g., by assessing client demand) and the effort needed to implement them. Assess digital opportunities worth pursuing according to their short-, medium- and long-term impact. Prioritization by key stakeholders will surface those areas with the highest cost-benefit ratio, whether that is video functionality for relationship managers or self-service for simple trading.
  4. Develop an overall digitization roadmap.
    A roadmap for digital transformation serves multiple purposes: establishing an implementation plan that builds up digital capabilities over several years, galvanizing the organization to ramp-up resources and know-how around digital, and outlining the investments needed over time.
  5. Develop a high-level solution design, and define key architecture principles.
    Seek consensus on high-level solution design and the underlying architecture behind the digital roadmap. Key questions might include: Should user interfaces be designed for mobile devices first? Should a “buy-before-make” policy be adopted or combined with in-house development only for integration?

The right digital offerings can yield attractive benefits, ranging from revenue uplift and increased customer penetration to lower operating costs. Given the increasing importance of technology, IT executives and technology leaders are uniquely positioned to drive the transformation toward digital.


Digital is transforming every aspect of the wealth management industry – from your clients to your competitors to your service providers. Fortunately, implementing the right digital strategies can pay off in terms of higher revenue, lower operating costs and greater customer satisfaction.