The digitisation of private markets in wealth management
Insights

The digitisation of private markets in wealth management

6th December 2022

Technology has long been used by many financial services sectors to improve client access, automate administrative tasks, and scale operations more efficiently. However, the digitisation in private markets has been fragmented, and remains at a relatively immature stage of development. 

Delio has seen first hand how financial institutions that have digitised their private markets propositions from an early stage have done so with great success. Our recent research illustrates this point very clearly, with 82% of wealth managers reporting that technology is playing a significant role in how they manage their clients’ access to private markets. Perhaps just as pertinently, this shows that firms that are slow to adapt to a digital approach are at risk of being left behind.

Overcoming operational challenges with technology

Delio’s recent report, Private markets in wealth management 2022, showed that wealth managers highlight three main barriers to growing their propositions; operational challenges (53%), regulatory challenges (41%), and a lack of resources (41%). 

The role that technology can play in solving these challenges cannot be overstated given that digital tools can directly address the main obstacles facing wealth managers. For example, repetitive operational processes can be automated to improve efficiency, regulatory governance can be managed more robustly through pre-determined workflows, all of which helps to reduce the number of people involved by focussing the attention of specific team members on tasks specifically when they’re needed.  

Efficiently scaling operations

By implementing a digital framework to underpin the delivery of their private markets proposition, financial institutions can quickly increase the volume of deals they offer and the number of clients that can access them. 

Historically, firms would have connected their clients with investment opportunities through face-to-face meetings that would be reliant on a manager’s knowledge of their client’s investment preferences, not to mention their respective availability. Through the use of technology, more deals can now be shared with a wider audience quickly and effectively thanks to digitally stored investor profiles that are matched automatically with new deal flow. This means that investors benefit from an enhanced client experience while managers have access to analytics and reporting that enables them to target their commercial conversations far more effectively.   

Another benefit of technology is its ability to reduce a firm’s reliance on well paid team members to complete repetitive administrative tasks and freeing up these resources to focus on fee-earning activity. This means firms can scale their operations sustainably while avoiding the significant expense of multiple new hires.

Operational efficiency is another key benefit for firms that are embracing the use of technology. Process automation enables team members to become involved in the investment lifecycle as and when required to do so, while ‘triggers’ in workflows ensure that actions, such as the sharing of important documentation, take place as soon as possible rather than relying on a person that could be in meetings or on annual leave. 

Perhaps most importantly, the digitisation of these complex operating models means that all activity is tracked in one central hub that offers a transparent and holistic view for all members of the team. This not only delivers ‘one true view’ of a firm’s private markets activity, but also ensures robust regulatory tracking.

Generating investor insights through data

It’s not a new concept that technology enables firms to capture and analyse vast amounts of data. However, if this information hasn’t previously been accessible, it can be especially useful in providing firms with unique behavioural insights into their clients. By doing so, wealth managers are able to better understand the preferences of their investors, and tailor their offerings and communication methods accordingly. 

For example, if a wealth manager can see analytics on which deals investors are interacting with and when they last logged into the system, they can use this information to personalise their communications and inform their engagement strategy in a way that will strengthen client relationships and deliver long-term success.

Satisfying increasingly demanding regulatory scrutiny

Finally, technology can be used to outline a firm’s regulatory framework in a clear, compliant, and robust manner. The whole investment cycle is visible to external auditors, with all tasks and data relating to each step clearly documented to ensure transparency. Automatically logging this activity also means that time doesn’t need to be wasted doing this manually and mitigates against the possibility of human error.

Given the restrictions on which deals are appropriate for which investors, client classifications are particularly important for firms offering access to private markets. Using technology means that investors can be grouped based on various criteria such as their risk profile, interests and deployable capital. This approach enables wealth managers to ensure that financial promotions are only sent to or shared with appropriate clients.

What’s next for the digitisation of private markets?

With wealth managers under pressure to deliver greater access to alternative assets, technology is likely to play a vital role in achieving this goal. Firms can gain significant operational benefits by digitising their processes while also enhancing their clients’ investment experience. Wealth managers that are slow to adapt are likely to find themselves losing ground on their competitors at a time when the industry is becoming increasingly competitive. 

Click here to discover how Delio’s technology enables financial institutions around the world to connect their clients with private markets deals in a compliant, efficient, and cost effective way.

Discover more about Private markets in wealth management 2022 in our latest research report.

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