Why personal advice + digital tools = the future of wealth management

Why personal advice + digital tools = the future of wealth management

16th September 2020

The global challenges of 2020 have shown how important it is for financial firms to focus on their digital strategy. While every business has had to adapt as a result of a global pandemic, those institutions who have invested in technology as a way of delivering their services were in a healthier and more agile position to deal with the fall-out of Covid-19. By digitising their offering, they were able to provide access to their services and stability for their clients during a time in which the word ‘uncertainty’ was used daily. 

While the role of digitisation has perhaps never been more important for wealth managers, it is a simplistic argument to state that technology is the answer to every challenge facing the industry. Having worked hard to accumulate their wealth, clients pay a premium for an expert to manage it on their behalf. This means they expect a level of personalisation to the service they receive. Yet, today’s clients also expect instant access to information and digital tools that save them time and make their life easier. So how do wealth management firms strike the right balance between modernising their service delivery without compromising client satisfaction?


The digital v human debate

In recent years, society’s growing reliance on technology has meant that all industries have come under scrutiny for how quickly they are adapting in a digitised world. This is particularly true of traditional sectors such as wealth management, which have been built upon foundations of human interaction and cultivated client-advisor relationships.

The mainstream adoption of technology has led to many commentators questioning whether technology could go as far as replacing the human element of wealth management. For example, Robo-advisers have become increasingly popular in the last decade. They’re cheaper, available 24/7 and are considered by some to offer a more efficient route to advice than a traditional financial adviser. It has led to many investors, particularly those whose portfolios would not have been considered significant enough to justify traditional advice, taking advantage of this new operating model. 

And yet investors are more than their portfolios; they’re human. They need an adviser that empathises, answers questions, and can understand how external factors impact investors’ long-term and short-term goals. PwC’s 2019 report on digital consumer banking illustrated that wealthy customers placed greater importance on ‘in-person advice’ than those with a lower level of investments and deposits. So while the debate of digital vs human advice has been discussed for some time to come, it’s clear that the need for the human touch remains.

Helping (U)HNW clients remain calm in a storm

It’s been a tough few months for investors. While individuals’ wellbeing remains a priority, market uncertainty is also on investors’ minds. To compound this, the world’s strongest economies are all facing a global recession. As a result, it comes as no surprise that investors are fearing a period of prolonged uncertainty.

In this climate, financial advisers play an important role. Over the last year, we have seen how crucial it is to keep a cool head and not act impulsively in response to news headlines. This is when the role of a human, financial adviser shines through. Their objectivity can help keep investors’ thinking in check and ensure emotions alone do not influence decision-making.

It has become clear that in any form of crisis, the desire for human interaction remains strong. After all, it’s the human advisers that can understand how Covid-19, as well as a recession, can affect investors’ goals. Empathy, and the personal relationships on which the wealth management industry thrives is vital. While machines are highly efficient, they are unable to use judgement, understanding or reason in the same way that humans can.

The trusting relationships between financial advisers and their clients are invaluable. When things get tough, it’s these relationships that clients seek.


Managing client relationships in uncertain times

With travel bans and social distancing becoming a necessity, face-to-face meetings have become a thing of the past for much of this year. Even though lockdowns are now easing, the few last months have shown that the wealth management industry needs to find alternative, digital ways to engage with their clients, as the demand for information and interaction remains high. 

Although Robo-advisers may be effective at rebalancing portfolios, Covid-19 demonstrated that a more personal approach is needed alongside this. Investors valued advisers that could grasp the whole picture. They wanted advice from experts who were affected by the same global pandemic and who not only understood their financial position and values but who also had a clear view of their broader financial picture. Financial advisers can minimise the effects of transitory periods. As such, many investors and financial advisers have been busy reviewing, balancing and diversifying their investment portfolios with the aim of adding stability to their clients’ finances. 

This is where technology can play a fundamental role in supporting the work of a wealth manager. While meetings, briefings and events can’t take place in person, digital tools can still be used to share information on client portfolios, explore new commercial opportunities and maintain channels of communication. This doesn’t mean that the level of service a client has come to expect has been compromised. If used correctly, it could lead to an increased standard of care thanks to more personalised and relevant engagement. 


If the human element is so important, why do we need tech?

Financial advice and managing investments is an inherently human process. So what role does technology have to play in the client-advisor relationship? 

Today’s wealth creators value the trust and expertise that the relationship with a wealth manager offers. Yet, they also want to have more ownership over their investment portfolios. They want to drive decision-making and be more involved in the investment process. Even before the pandemic, investors longed for greater accessibility, control, and transparency. They want to be able to access their finances at any given time and manage their portfolios without having to call or wait for their next allocated catch-up. They like to understand how their investments are performing, and want data that provides valuable insights. 

Here, the benefits of technology come into play, with Covid-19 acting as the final push to digitisation for many financial firms. By digitising access to services such as portfolio management, financial advisers can focus on helping clients grow their wealth and navigate the market at its most volatile time.

It’s time to stop viewing the digital vs personal debate as an either/or approach. Instead, we need to see technology as an enabler and an educator. The global pandemic has shown that people are the industry’s greatest asset. But, it has also demonstrated that advisers who do not adapt their strategy to utilise technology will risk falling far behind as innovative firms adapt to meet the changing needs of clients.