Outside-IN

Your practice needs total digital transformation

Business improves when advisers upgrade technology for client acquisitions, account servicing and asset growth

Dec 6, 2017 @ 3:46 pm

By Steve Scruton

Offer any Wall Street firm the chance to boost annual revenues by nearly 10% while growing market share and boosting productivity of key employees, and most chief executives would jump at the chance without hesitation. That may sound like a fantasy, but that's happening at wealth management firms that are advanced in their digital transformation.

Firms with a mature digital business are seeing annual revenues rise by 8.6% and market share grow by 6.3% while their advisers are 11.3% more productive. Those are among the findings of Roubini ThoughtLab's Wealth and Asset Management 2022: The Path to Digital Leadership.

The report portrays a wealth industry that's finally fully convinced of the need to go digital: Whereas last year, 24% of CEOs viewed digital transformation as unimportant or only slightly important to their business, this year 96% say digital transformation is crucial.

TECH SEA CHANGE

This sea change comes as wealth management is being disrupted. Facing robo-adviser competition, most firms have incorporated that technology into their offering—their advisers are now "bionic," blending human advice with the best of technology. A secular downward trend of lower fees and margin compression has been exacerbated by the U.S. Department of Labor's fiduciary rule, and by a consumer shift to passive investing and low-cost products.

As Google, Apple, Amazon and others drive fintech innovation at a dizzy pace, some Wall Street firms are struggling to keep up. Four out of every five retail banks have been slow to create smart beta products that offer low-cost, passive investing strategies, 71% of broker-dealers feel unready for fintech disruption and 50% of asset managers are struggling to help clients set holistic goals.

Such personalized service is increasingly important as consumers expect wealth management to be as customer friendly as products from Apple or Amazon.

The good news is that no set of firms dominates wealth management in the digital age, so wealth managers can still succeed if they invest in digital transformation. Firms that have fully embraced digital spend 11.6% of their revenue on technology, and plan to boost that to 17% by 2022. Those investments can produce average ROI as high as 5.5% of annual revenues each year for five years.

The survey of 1,503 firms categorized 29% as digital leaders with a mature digital business, 48% as transitioning to digital, while 23% are at the beginning of that journey. Digital leaders get 32% of revenues from digital channels, and expect to reach 48% by 2022.

WEALTH TRANSFER

Getting digital right is especially important as the industry expects a $30 trillion wealth transfer in the coming generation. Most firms are investing already in digital, but many are not doing enough. Too often investments aim to improve one aspect of a firm's offering, whether that's adding a robo-platform or social media marketing tools. What's needed is a digital transformation that updates everything, from client acquisition to servicing accounts and growing assets under management.

As firms leverage such technologies as analytics and artificial intelligence to better target prospects, advisers may spend 30% less time prospecting for business but they will acquire more new customers from that effort.

The coming disruption requires firms to have a digital vision that is supported by a business case, and then digitally transforming the entire business. Firms must embrace a culture of innovation, adopt a customer-centric mindset, and use agile development methods used in Silicon Valley to develop products.

The alternative is moving too slowly, resulting in losing $79 million for every billion dollars of annual revenue and perhaps, in the end, failing.

Steve Scruton is president at Broadridge Advisor Solutions.

0
Comments

What do you think?

View comments

Upcoming event

Sep 10

Conference

Denver Women Adviser Summit

The InvestmentNews Women Adviser Summit, a one-day workshop now held in six cities due to popular demand, is uniquely designed for the sophisticated female adviser who wants to take her personal and professional self to the next level.... Learn more

Most watched

INTV

Young advisers envision a radically different business in five years

Fintech and sustainable investing are two factors being watched closely by some of the 2019 class of InvestmentNews' 40 Under 40.

INTV

Young professionals see lots of opportunity to reinvent the advice experience

Members of the 2019 InvestmentNews class of 40 Under 40 have strategies to overcome the challenges of being young in a mature industry.

Latest news & opinion

Vermont establishes restitution fund for victims of investment fraud

Portion of settlements with financial perpetrators would supply the pool.

10 IBDs with the most variable annuity revenue

Although the popularity of VAs has declined in recent years, some independent broker-dealers still do a good business in them.

Target-date fund design may be wrong for retirees

Researchers suggest the funds don't adequately hedge against sequence-of-returns risk in retirement.

InvestmentNews' 2019 class of 40 Under 40

Our 40 Under 40 project, now in its sixth year, highlights young talent in the financial advice industry. These individuals illustrate the tremendous potential of those coming up in the profession. These stories will surprise, entertain, educate and inspire.

New Jersey fiduciary rule: Pressure leads to public hearing, comment deadline extension

Industry push results in chance to air grievances on July 17 and another month to present objections.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print