How the Wealth Management Industry is Adapting to the Digital Revolution
The wealth management industry has been slow to adopt digital transformation. In a sector based on close interpersonal relationships, in-person interactions with clients and a multitude of manual processes, many have been reluctant to alter their business model to introduce digitisation.
The regulatory burden has also proven an obstacle to embracing new technologies. However, in the aftermath of the global pandemic, the industry is beginning to adopt new technologies and processes and find ways to deal with factors such as remote working and increased adoption of digital financial solutions.
As an attorney-at-law with a strong focus on wealth structuring, Dr Edgar Paltzer is keen to see where the digital transformation will take the sector next.
The Role of Digital Technologies in the Private Client Sector
In the private client sector, digital technologies present both solutions and challenges. Technology increases connectivity and introduces streamlining methods to make operations more efficient. However, it also exposes clients to cybersecurity risks that need to be managed effectively.
The private client space has the potential to be transformed by digitisation, in a world where increasingly almost every asset of value can be digitised, transacted and commoditised. This could infiltrate every single aspect of the private client sector.
The Effects of the Pandemic
According to McKinsey, the global pandemic accelerated digital adoption within businesses by around four years. In particular, an increase in the use of online communication has been seen across almost every industry sector, including the wealth management industry.
People of all ages and in all sectors are increasing their use of online meetings, smartphone apps, email, online banking and other online payment and financial services. Private client advisors are turning to these technologies to connect more with the younger generation.
In turn, this is beginning to improve cost efficiencies, bolster risk management and create more product diversification across a wide range of services.
Wealth Management Innovation
A multitude of new investment and wealth management products have already appeared since the pandemic, driven by the adoption of new technologies. This includes platforms that provide investors of all sizes and wealth portfolios with access to global stock markets and other products without incurring the traditional hefty broker fees.
Around 90% of investors already use digital platforms to complete all or some of their investment activities, according to a study by FactSet, demonstrating high demand for new technologies and channels of communication within the wealth management industry.
