While the digitisation of the client journey had already begun prior to Covid-19, the pandemic has sped up the process dramatically.
Recent research by Wealth Dynamix has asked – does an increasingly digitised client journey pose a threat to loyalty or provide the key?
The company said, “Wealth management has been revolutionised by digitisation, yet digital services are no longer a differentiating factor: they are everywhere you turn. Technology is so ingrained and integral to modern working practices and the delivery of services that it’s no longer a case of having a digital strategy for the business but a business strategy for digital.”
Previously, a company offering a digital experience was seen as a beneficial extra and a driver for customer loyalty. Today, however, digitisation is the very minimum expected, with many wealth managers potentially wondering whether their success is tied to the technological capabilities of their company.
Despite the huge push to digital, that in itself will not be the only driving force of client loyalty. Digitisation may provide wealth management firms with a competitive edge, but wealth management services cannot be delivered by digital services alone, with relationship managers and financial advisors also key players.
Wealth Dynamix noted there is still a need for personalised service by wealth management companies to serve the more complex portfolio level, long-term investment decisions. Digitising elements of a service can help traditional providers avoid losing parts of an individual’s portfolio or all of it, but there must be balance.
The business remarked, “Larger businesses have the scale, the people, and the pedigree to make it worthwhile to invest in new platforms to aid loyalty via effective client lifecycle management. Yet, they often lack the DNA of new market entrants who operate without the overhead of legacy systems. By contrast, new entrants have the tech – but none of the DNA of the banks.”
Many of those who are new to investing will conduct their business on user-friendly apps, and this is unlikely to change going forward. In this case, wealth managers who resist change and project a more formal, conservative image may be in danger of losing investment potential.
Wealth Dynamix continued, “Whilst the trend for peer endorsement has its limits – friends able to recommend an app are unlikely to be able to support more complex, nuanced investment decisions – relationship managers cannot assume their expertise will be realised by inexperienced investors. It’s critical to keep pace with digitisation to retain existing customers and attract new ones. Loyalty drives use and recommendation – both are essential for future profitability.”
The rise of platform aggregators is also leading the bar for digitised services to continue to climb. Platform aggregators can simplify the onboarding process and remove it as a barrier to switching provides – driving the potential for client defection.
Wealth Dynamix raised the idea of using a biometric process – such as the data within open banking platforms – that could fuel such behaviours in wealth management. This is as biometrics could enable clients to switch wealth managers more easily and efficiently.
The company concluded, “Times are changing, and those who do not reassess and re-strategise will lose ground. Even the concept of loyalty is being challenged. It’s a theme that has commonly inferred a sense of steadfastness and reliability in the banking world, with high-street banks like Lloyds using slogans like ‘By your side’ for years to try to build trust.
“We feel the balance of power has shifted. Data has usurped the relationship manager at the heart of the relationship, and the data holder is the key to an accurate, real-time, 360 view of the client. It will be down to relationship managers and financial advisors to remain agile and create a sense of genuine connection, supporting the digital experience with human interactions. ‘Show me you know me’ has never been more relevant than in this space.”
Find the full post here.