Digital Disruption in Wealth Management identifies digital capabilities that advisers need to build; how they can transform their organisations for the digital age; and where they should direct their digital focus.
According to an EY client survey, 59% of clients would prefer to be advised over digital channels within the next two to three years.
Unsurprisingly, younger generations are more likely to consider robo-offerings than older age groups, with 61% of surveyed clients aged between 18 and 34 likely to consider robo-advisers, compared with 51% aged between 35 and 50, or 24% aged between 51 and 71.
Interestingly, however, it is primarily the high net worth (HNW) segment that has the greatest awareness of, and preference for, robo-advice, not the mass affluent or emerging HNW segments.
More than 70% of HNW clients would consider robo-advice, compared with 37% of mass affluent clients.
Storming the gates
“Automated wealth managers or robo-advisers, are storming the gates,” according to report authors Robert Rummler, EY’s Swiss leader for tech-enabled transformation in wealth and Alex Birkin, EY’s global wealth advisory leader.
“Using algorithms to offer financial advice for a fraction of the price of a real-life client advisor, they are growing at a rapid pace, doubling their assets under management every few months.”
The report identifies three pillars which support the robo-adviser model; rapid assimilation of new tech, self-service and automation and use of passive investment strategies both of which keep costs low.
To avoid being left behind EY has five tactical “no regret” steps for advisers to stay ahead of the trend:
Define digital objectives and criteria for success
Delineate the objectives they are pursuing and how you define “digital success.” Examples could be: increasing client loads per relationship manager by 10%, reducing operational cost by 15% or achieving client satisfaction ratios of 90% with digital offerings.
Determine the broader implications across the business and operating model
Successful digital strategies require changes beyond process and technology. Additional areas to keep in mind: client segmentation, governance of digital channels, operational readiness, digital product and service content and organisational blueprint.
Assess the digital capabilities needed, and prioritise their implementation
Evaluate digital capabilities in terms of their impact (eg by assessing client demand) and the effort needed to implement them. Assess the digital opportunities worth pursuing according to their short, medium and long term impact. Prioritisation by key stakeholders will surface those areas with the highest cost-benefit ratio, whether that is video functionality for relationship managers or self-service for simple trading.
Develop an overall digitisation roadmap
A roadmap for digital transformation serves multiple purposes: establishing an implementation plan that builds up digital capabilities over several years, galvanising the organisation to ramp-up of resources and know-how around digital, and outlining the investments needed over time.
Develop a high-level solution design, and define key architecture principles
Seek consensus on high-level solution design and the underlying architecture behind the digital roadmap. Key questions might include: Should user interfaces be designed for mobile devices first? Should a “buy-before-make” policy be adopted, combined with in-house development only for integration?
