Wealth managers’ lack of consistent investment in technology could push their clientele toward more digitally-savvy financial institutions, according to an analysis by Oliver Wyman and Morgan Stanley.
The pandemic has undoubtedly altered clients’ expectations for a digital customer experience provided by their financial adviser, according to the research released in June. Firms have experienced a tenfold increase in clients’ digital engagement across all channels. Wealth managers, however, have yet to enhance digital capabilities to match their clients’ level of engagement.
The research looked at the number of updates firms make to their mobile applications compared with their retail banking counterparts, Lian Zerafa, partner at Oliver Wyman said in an interview.
The contrast between retail banks and wealth managers digital enhancements is “stark” — with retail banks updating applications almost twice as frequently as wealth managers in 2019, according to the study. For financial institutions with both a retail bank and wealth management division, retail applications were updated almost 50% more regularly than the wealth management applications.
As a result, clients were “gravitating back toward financial institutions for security" to try and keep their assets intact, Zerafa said.
The pandemic has also exposed where the digital experience is weak. "Advice channels have been hammered by large call volumes and those channels were just not designed for that,” he said.
The underinvestment in tech also represents a lack of confidence by wealth managers that digital investment initiatives are working. “When organizations make investments in their digital initiatives for financial services, only 25% are confident that the investments will actually succeed, which is shocking,” Zerafa said, noting the statistic comes from a separate Oliver Wyman State of Financial Services report released in February.
Still, accelerating digital implementation efforts to improve effectiveness in the post-pandemic environment is critical and wealth managers have hurdles to overcome. “Usually [technology investments] are siloed initiatives living side-by-side with each other,” Zerafa said. “Unifying and creating a consistent digital experience for [wealth managers] is harder because of the complexity of how technologies are arranged, but that’s the fragmentation that’s occurred.”
To keep clients and businesses thriving, wealth managers need to take a step back to assess their current and future digital investments. Some technology advancements remain unfeasible for any wealth manager given capital and resource constraints, according to the study. To that end, wealth managers should look to cost-effective “omni-channel” digital tools that pair the convenience of an app with the security of a traditional adviser.
Wealth managers must realize “we aren’t going to go back to the old normal,” Zerafa said. “So the question is: ‘How do you start to rethink what the new normal looks like?’”
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