Kicking off 2021 just where we left off – at home – has pushed out expectations for a return to ‘normal’ life anytime soon. With some already writing the history on office life and doing business as we knew it, the rapid pivots many wealth managers rolled out last year look set to re-shape the industry longer term.
Before the pandemic, technology was already disrupting and changing consumer experience and expectation in every industry – across travel, music, entertainment and beyond. The way people engage with brands and make purchases has changed for good, with the expectation of personalised, outcome-based experiences at their fingertips. This has driven a shift away from a product-centric world, to one that is relationship led, with the market leaders across all sectors harnessing data to best serve customers' needs and build connections beyond their own brand's physical or virtual front door.
For an industry built on face-to-face relationships, expert advice and, fundamentally, trust, the past 10 months have been pretty Darwinian for the parts of our industry more resistant to change.
Firms without a digital investment platform and ability to connect and serve clients virtually have struggled over the past 10 months, as digital channels to communicate with existing clients and attract and onboard new ones became table stakes.
With technology now right at the top of C-Suite strategic agendas and senior decision-makers across the industry assessing the impact that enhanced data analytics, fintech and technology is having on their organisation now and over the next five, 10, 20 years.
In 2020, investment platform sign ups broke almost every rule on record; Hargreaves Lansdown signed up a record 84,000 new clients in the six months to December alone. Combined with the social restrictions of lockdowns, this surge has demanded a rapid digital awakening in wealth management.
Across the UK, we have seen firms double down on their digital capabilities – both front and back office – harnessing technology to support both client service and risk management perspective.
From here, the firms that will succeed in the future are those that take the big decisions; to invest in re-platforming core systems; and to create a seamless data stream from back to front office – ramping up efficiency to help advisers deliver more meetings and, crucially, engage with clients in a more tailored, personalised way.
Efficiency is the key to scaling, enabling firms with 100 clients to service 1,000 clients with the same level of effort. Many wealth managers may not yet be at the point where client data is automatically available and integrated, but in the longer term, this can only help to ensure that in-person advisory (once possible) is deployed at the point of necessity.
Of course, enhanced data integration and risk analytics are not only enabling advisers reach more clients but supporting more sophisticated understanding and analysis of portfolio construction and asset allocation.
Over recent months our own clients have taken an unprecedented number of tactical allocation decisions, laser-focused on resetting portfolios strategically for a post-Covid-19 world. Many have turned to alternative products to add resilience and additional sources of yield to portfolios, some for the first time through enhanced technology and analytics.
The ability to capture upside opportunities, mitigate drawdowns and re-risk effectively to take advantage of market upticks will be key to navigating the altered investment environment this year – whether in person or through the screen. While many will associate the word disruptive with 2020 – of lives, jobs, and our economy as we knew it pre-pandemic – others will also choose to see it as transformative. The digitisation of the wealth management industry is critical to delivering for the next generation of investors – a digital-first cohort that expects to build trust, relationships and meet their goals through technology.
Joe Parkin is head of UK banks and digital channels at BlackRock.