Wealth management’s technological shift is happening on multiple fronts. Firms are investing in new technologies while simultaneously scaling their existing systems and integrating outsourced solutions to create a more holistic and dynamic client experience. The rise of robo-advisors, artificial intelligence (AI) and machine learning (ML), and transparent, flexible dashboards offered by fintech startups have pushed traditional firms to adapt and innovate if they want to catch the interest of younger investors.
Spending on cloud-base solutions accelerated dramatically in the early months of the COVID-19 pandemic as many organizations scrambled to implement remote working solutions or scale up what capabilities they already had in place.
While the pandemic can’t end soon enough, this trend upward will be around a while, according to Gartner. Cloud solutions are projected to make up 14.2% of the total global enterprise IT spending market in 2024, up from 9.1% in 2020.
A Thomas Reuters survey last year showed 68% of respondents looked to implement new technology to stay nimble in the “new normal,” and 69% of participants said they are hoping technology developments will keep their firms relevant in the short and long term.
As wealth management firms address these issues and other challenges facing them in 2021, here are some trends to consider as you evaluate and invest in new technology.
Technology Spending is On the Rise in the Advice Industry
Wealth management firms across the industry view technology as vital to success in the digital world. Leading voices like Fidelity and Goldman Sachs are competing heavily for the best tech talent as they implement blockchain, AI, virtual reality and other technologies to anticipate the needs of customers before their competition.
According to InvestmentNews, “the median year over year increase in tech spending was 15.8%, for an average of $120,309, an all-time high.” It is anticipated that this trend will continue at an accelerated pace, as experts predict annual technology spending across the financial services industry will reach $24 Billion by 2023.
What do the Executives at these name-brand companies understand best about technology? That it’s not just a tool, it’s a strategic advantage. This is why the industry leaders put a decent chunk of their revenues right back into enhancing their technology stack. InvestmentNews reports that firms spent a record 3.69% of revenue on technology.
Investment is Focused on Efficiency Gains, Enhanced Experience
Investing in software and tools that improve processes empowers advisors to use their time more efficiently, focus on more strategic matters, and perform at the highest level. Technology investment only works if it improves the way a firm operates.
InvestmentNews reports that wealth management firms look for technology that streamlines processes, automates workflows and helps them better serve their customers. This operationalization strategy pays off, too; according to FinancialPlanning, automating workflows can help financial advisors close deals 25% faster.
On the other side of the “virtual” desk is the customer experience.
Investing in technology that enhances the customer experience helps firms attract newer, younger investors and keep them coming back. Wealth management firms with enhanced digital experiences gain advantages over competitors, including:
- Accurate and hassle-free onboarding through paperless systems
- Improved ability to manage important documents
- Seamless transitions between advisors through automated workflows
- Increased confidence in their ability to maintain Reg BI compliance
Cybersecurity Remains a Top Concern
As wealth management firms incorporate more digital operations into their strategies, cybersecurity remains a top concern among advisors and investors. In 2018, 20% of the cybersecurity events reported to the Financial Conduct Authority in the UK came from financial services firms.
With breach events consistently making headlines for several years now, anxiety across the industry has steadily risen — 66% of advisors say that cybersecurity will be a top concern over the next few years, according to InvestmentNews research. While wealth management firms may not physically hold their client assets under management, they are legally required to collect and store vast amounts of information for all clients, making them a potential target of the bad guys.
As many firms shift into their new normal and uncertain markets, they’re taking inventory of their technology and seeking solutions that support a remote workforce and clientele, optimize costs, and provide a launchpad for innovation.
Patrick McMahon is Executive Vice President – Enterprise Business Solutions at Docupace. Patrick is an experienced sales leader who works with C-level executives and business owners to execute digital transformation programs and modernize operational processes. In his role, Patrick has helped many organizations, both large and small, in the investment and financial advice industry realize their true potential by moving to the cloud and streamlining their digital processes.
