Advancing Wealth Management With A Digital Ecosystem

Advancing Wealth Management With A Digital Ecosystem

People increasingly ask whether traditional advisory firms and private banks will continue to exist in the wealth and asset management industry. My educated guess is yes. But to survive, they must offer a very different kind of service, focused on demonstrating their value to investors. Much of what wealth managers provide has become commoditised, meaning that they need new ways to elevate their offerings aimed at helping the customer rather than optimising internal systems.

The best avenue to advance the future of innovative wealth management would be to develop an open ecosystem, which acts as a one-stop-shop serving both investors and wealth and asset management industry professionals. This kind of ecosystem or marketplace would allow stakeholders to see tailored information, select the relevant components and compare what’s on offer at every stage of the investment journey. As a result, we could meet everyone’s needs in a transparent, and collaborative environment with personalisation and massive potential for progress.


Calls for a new approach to innovative wealth management

Digital transformation is evolving rapidly on the path to wealth management 4.0. This is being driven by several influences, most notably a change in customer requirements. Investors want a 360-degree view of their wealth, encompassing all the various entities they interact with. A lack of integration to date has made this impossible.

Whereas people are used to seamless, interconnected experiences and personalised recommendations in sectors such as retail and healthcare, we haven’t been able to offer that yet in wealth management. This has caused frustration especially amongst Millennial and Gen Z audiences, who already feel excluded by private bankers.

To stay relevant and democratise their products and services, wealth managers need to embrace interoperability and share crucial information rather than sticking to individual data ponds. Combining data ponds into a centralised lake would create a holistic picture that puts the investor, not the wealth manager, in the driving seat.

The wealth manager will always be there to advise, but people want to know exactly what they are buying into, how their chosen firms operate internally, and what return on investment they are getting. That’s also where the need to expose internal insights such as portfolio management, portfolio analysis, portfolio reporting, and risk analysis comes in.

To present a granular view, advisors must understand the investor’s entire experience, not only the small part they play in. By developing an industry-wide digital front door, in other words, a far more sophisticated kind of client portal focused on the investor’s full end-to-end wealth journey, we can connect all data in one place, with easy access points, plus the added value of analysis and trends. Customers can then see what differentiates providers and investments, enabling them to evaluate opportunities and risk on a completely new level.

As a precursor to sharing data, the industry should adopt unified standards for exchanging digital information. These are big steps to take. And, naturally, some providers will be nervous about opening themselves up to scrutiny. However, change is happening whether people like it or not – relinquish control or lose customers altogether.


Benefits for all

Developing an open ecosystem won’t only benefit investors. Greater transparency, increased connections, and correlations will make it easier for firms to innovate and identify value-added services. And, with standardised data exchange models already in place, it will be quicker to forge powerful collaborations. For example, if incumbents are interested in creating new digital products, they won’t need to go at it alone. Instead, they will have access to the best fintechs and other partners as part of the ecosystem.

The more shared data we can leverage, the more it would help to measure volatility and add value from a risk perspective. We could predict probable scenarios and show investors the impact on their portfolios. Likewise, we can personalise recommendations more effectively when all available information is connected.

Identifying and onboarding new customers also becomes easier, even with a growing number of self-directed investors. If firms are part of an ecosystem that includes all types of investors, there is a connection from the start. That relationship can then be nurtured when the time is right, depending where an investor is on their journey. It is a warm lead because both parties belong to the ecosystem. Moreover, KYC, the AML checks have already been done, saving time and money.

Historically, the industry has relied on investors doing the running. It was a status symbol to have a wealth manager or private banker, but times have changed and status is being redefined. An investor’s priority now is service quality. They want to understand what differentiates one organisation from the other.

Consequently, firms need to stop waiting for people to come to them and go where the customer is. Being part of something bigger i.e. an industry ecosystem is a natural step, otherwise companies restrict their visibility. We can draw parallels with Apple and Google’s app stores. Eventually, we may see multiple ecosystems and it makes sense to get involved in more than one, to increase the probability of winning business.

To seize opportunities moving forward, collaboration and standardisation are essential.


Originally Published on Wealth Briefing on 6 September 2023

By Nuno Godinho, Group CEO of Industrial Thought Group


About the author
Nuno Godinho is the Group CEO of Industrial Thought Ltd, the parent company for a group of companies shaping the future of financial technology, data products, and innovative wealth management. Originally from Portugal, Nuno is an international board member, CEO and entrepreneur with more than 25 years in business and digital transformation. In addition to founding technology consultancy Diisruptance, his previous roles have included chief technology officer, chief product officer, and chief digital officer with organisations, such as Microsoft, GE, and SAGE.