COVID-19 created a new reality for the wealth management industry. While the short-term effects are behind us, firms and advisors are still anticipating and predicting the pandemic’s long-term effects. These changes have already completely transformed the wealth management industry — from business processes to client interaction.
Digitization, the rise of robo-advisors, a more dynamic client base, and adopting newer technology were all important trends within the industry before COVID-19. In a post-COVID world, many of these factors accelerated.
The Push to Digitize
Even before the global pandemic, many firms recognized the importance of digitizing business processes and client services. However, as COVID-19 spread, firms entered a new phase of digitization. With fintech bringing additional tools and capabilities into the industry, client expectations have shifted, forcing wealth management firms to re-evaluate their digital offerings and overall customer experience or risk becoming obsolete.
Today’s clients actively avoid any customer experience that is complicated or unclear. For advisors, digitizing error-prone, time-consuming, or complicated tasks has been a top priority to deliver higher client value. This includes processes such as onboarding, document signing, and account transitions. With COVID-19 preventing most human interactions, firms rapidly pushed to digitize these processes, and the trend is expected to continue in a post-COVID world.
The 2019 BDO Middle Market Digital Transformation Survey found that 97% of financial service firms are taking steps to implement more digital tools within their organization. Of those surveyed, 21% listed digitalization as the top priority for their firm. Firms that invest heavily in new technology to provide clients with the omnichannel experience they expect ensure their survival in the coming years.
The Power of Personalization
Prior to the outbreak of COVID-19, the industry experienced a change in client base. Younger, tech-savvy individuals are expected to account for almost three-quarters of total income by 2025. Additionally, as the number of single or divorced women in the workforce increases, so does the need for a new type of wealth management.
This new client base demands personalization. It’s no longer enough for firms or advisors to offer generic financial advice. Today’s clients expect personal, tailored advice that matches their specific financial situation and goals. Emerging technology will play an instrumental role in the era of hyper-personalization within wealth management as technology like artificial intelligence, machine learning, and data analytics provide valuable customer insight.
A Human Touch is Still Essential
One of the most adopted forms of new technology within wealth management is virtual assistants and chatbots. The industry managed $460 billion in 2020, a 30% increase from 2019, and some analysts predict the industry will grow to $1.2 trillion by 2024. Within wealth management, these programs have become increasingly popular as they can provide personal, automated advice based on financial algorithms. Additionally, robo-advisors have automated much of the repetitive, manual tasks that distract advisors from client-focused activities.
However, while robo-advisors will be an integral part of the industry’s future, financial advisors are still needed. In fact, 84% of investors say that financial advisors will always be needed. The experience, knowledge, and planning of human advisors cannot be replicated by technology. Rather, technology should help support the client interaction, ensuring clients have 24/7 access to financial help via chatbots while advisors focus on client-facing processes.
Looking to the Future
As the wealth management industry continues to adjust to the new normal created by the COVID-19 pandemic, firms’ success will be determined by how quickly they can adapt to the needs created by the crisis. Those who accelerate their digitalization, focus on personalization and find the balance between technology and the human touch are those who are likely to succeed in a post-COVID industry.
