Why wealth managers should be wary of digital legacy traps

The growth of digital use in wealth management is helping the industry go from strength to strength. However, there are still some key traps wealth managers can fall into when developing their digital offering. 

A recent post by WealthTech firm Kidbrooke has detailed how it can be easy for wealth managers to build ‘customer journey islands’ when introducing a new service and feature, instead of develop ‘use case-agnostic’ technology which offers a more holistic solution and supports all components of a company’s strategic roadmap.

Many financial organisations are currently going through the process of digitalising after the effects of the pandemic – primarily the hybrid working model – are taking hold permanently. However, some wealth managers are running into problems, as they release siloed customer journeys that struggle to manage infrastructure challenges and can lead WealthTechs to fall into legacy traps.

Kidbrooke said, “Legacy infrastructure is undoubtedly one of the most common obstacles for innovation in the established financial industry.  Antiquated software still runs key processes within banks, insurers, and wealth managers. These legacy systems are often incompatible with the components of modern digital and hybrid channels and updating them is expensive and cumbersome. Still, legacy challenges seem imminent because they are a by-product of innovation processes accumulated over decades. However, with the right approach to innovation it is possible to optimize the architecture of new solutions to prevent the legacy traps at least a few years down the line and build consistent, reliable and holistic digital experiences.”

According to the firm, the most common mechanism of falling into the legacy tap is closely connected to a classic approach to innovation. This would commonly entail starting with a small use case, testing it and if successful, rolling it out in production. This can translate into the case that when wealth managers build a new customer journey, they typically build an isolated functionality based on a specific use case.

What are the benefits of use case-agnostic technology? Kidbrooke mentioned that it can help you ensure that the results of financial calculations throughout a customer journey are consistent as a business grows. In addition, you can also dramatically shorten time-to-market due to simplified decision-making among stakeholders.

A third key benefit is that when a company has built up several journeys or use cases, you can easily then tie them together into a more complete whole. Kidbrooke added this is what will continue to add value to a firm’s customers and keep customers engaged over time.

The company concluded, “In the context of accelerated digitalisation, legacy challenges are likely to occur much faster. In this environment, a strategic approach to selecting technology powering your digital wealth services becomes critical to achieving high flexibility and speed of your innovation process.

“Therefore, it might be a good idea to start with reviewing your roadmap and ensuring that the technology you select supports all the use cases you are planning to build and enables you to adopt a holistic approach to your institution’s relationship with every customer. This way, you not only avoid the integration issues that inevitably come with customer journey islands, but also ensure that in time you can build a holistic, consistent, and robust service that secures your position in the new reality for years to come.”

Read the full post here.

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