COVID-19 has forced many businesses to adapt and even rethink their business models. The traditional ways of doing business, such as in-person meetings and physical document exchanges, have been replaced with Zoom meetings and digital signing.
As wealth management firms prepare to return to a new normal, digital tools will become a key part of meeting client expectations. While many organizations had implemented some of these tools, the pandemic drove adoption and implementation dramatically. And, as younger generations begin to amass more wealth — Millennials are set to inherit nearly $68 trillion by 2030 — they’ll expect solutions that are personalized and digital.
To compete in the market post-COVID, many organizations have optimized their operations for the digital world to capitalize on the massive growth and valuation opportunities that lie ahead.
Digital Companies Create M&A Opportunities
According to Financial Advisor IQ, the year 2020 saw a record number of mergers and acquisitions, up 20% from 2019. Of 159 total deals in 2020, most transactions occurred in the second half of the year. Wealth management firms that transitioned to digital workflows gained a key advantage over their competitors: agility. This agility is crucial for M&A activity. Whether you are a buyer or a seller in the M&A arena, your speed to market and ability to react to market trends, changing conditions, and (especially) disasters can be a determining factor in your valuations.
2020 also saw an increase in deal sizes, where the average valuation of acquired firms is said to have reached $1.7 billion. As the dollar figure of deal sizes rise, firms that effectively leverage digital solutions are in pole position as both buyers and sellers because of an increased ability to onboard clients, manage documents, and automate transactions.
Optimizing operations for more digital services removes the hassle of paperwork and manual signatures from investors and advisors, creating a more satisfying and productive wealth management experience that can be completed faster than ever before. All this adds up to more profitability and higher valuations, which puts you in a better situation whether you are buying or selling in the current M&A arena.
Digital-Ready Firms Are More Disaster Proof
The global pandemic taught businesses that their reliance on a physical location is dangerous to their future. In 2020, many firms were severely threatened by COVID-19 restrictions because they could not access physical files in their offices or meet with clients in person. In a PWC survey, concerns about COVID-19’s impact on workforce conditions and productivity was a top concern among wealth management firms.
Firms that transition to digital operations through a secure platform can access client data and work with clients, regardless of their physical location, putting their minds at ease and keeping business moving during an already turbulent time. This added resilience and flexibility adds value to a firm by making them less vulnerable to physical threats posed by elements, disasters, and data breaches.
As the world continues to recover from the current pandemic and enter a new normal, firms that operate digitally reduce their recovery time while increasing their ability to empower advisors and investors alike.
Digital Firms Win the Talent War
The wealth management industry is also experiencing a shortage of talented younger advisors and increased competition for competent professionals. In 2018, the Retirement Income Journal estimated that less than 12% of financial advisors were under 35. Younger professionals are proficient with technology and can be attracted to industries with more innovation and disruption.
The digital transformation of wealth management operations gives firms yet another advantage because they extend their reach. When a firm is not tied to a building or specific location, they widen the talent pool to a global audience. Advisors feel supported no matter where they are and can provide top-notch service to clients as if they were in an office. By removing the barrier of physical location, firms also open themselves up to new clients they would have otherwise missed out on, which adds diversity and quality to their portfolios.
The COVID-19 pandemic has accelerated the digitization of wealth management, and many firms have made changes in months that were predicted to take years to implement. With the coming volatility and uncertainty in the economy, many clients are looking to their advisors to weather the storm and find stability. Offering solutions that meet clients where they are and flexibility to keep business moving during periods of anxiety will set firms apart and provide opportunities to serve their clients better than ever.
Download Report: Wealth Management’s Digital Future
Ryan George is the Chief Marketing Officer at Docupace. He is responsible for the company’s brand awareness, early-stage sales pipeline, content strategies, customer and industry insights, internal and external communications, design, and events. George actively engages in leadership roles in both the financial services and marketing communications communities. He a member of the Forbes Communications Council, an invitation-only, fee-based organization of senior-level communications and public relations executives, the CMO Council and the CMO Club.
