Orbium’s C-Level Survey 2020 report will help wealth managers chart a path to success as clients demand increasingly tailored services that reflect their personal goals. Katharina Mohr and Ian Woodhouse look at what to expect from this comprehensive study
An eight per cent fall in profits at Europe’s private banks last year indicates life is not getting any easier for the wealth management industry. The latest results come after more than a decade of accelerated change that saw multiple regulations changes, consolidation and closures across the globe, heightened competition, more demanding clients and eroding margins. While the industry had a better 2018 in Asia and the US, all signs are that wealth managers everywhere remain under pressure and need to continue to transform their businesses to ensure future success.
Many of these trends were already appearing in the last edition of Orbium’s C-Level Survey2. The 2020 survey now looks across the entire wealth management value chain, drilling down further to identify what will shape the evolution of the industry over the next 5-10 years. It assesses how firms will attract more, and new, sources of wealth, innovate with new capabilities, accelerate organisational change and activate technology to remain relevant.
A SHIFT IN CLIENT DEMANDS
Undoubtedly, wealth management has now become client-centric. Whereas before wealth managers decided what services and products to provide, today that choice lies with the clients. Increasingly they want highly tailored services that are aligned with their evolving values and life goals. Wealth managers that can pivot towards providing more individualised experiences, should thrive.
In the 2020 survey we look beyond wealth management to high-net-worth individuals’ attitudes and behaviour regarding their environment, ethics, politics, technology, data and privacy, values, wellbeing and more. By examining these attitudes and looking at how wealth managers can adapt to them, we can help them align with client expectations.
The first thing to understand is that meeting these new client demands will affect everything about the firm, and likely demand further significant change. The 2020 survey enables wealth managers to gauge the importance of different elements that will influence this change; helping them prioritise effectively.
When it comes to business and social value, for example, clients increasingly care about social and wealth inequality and expect firms to participate in the shared and circular economy. Similarly, we’ve seen in other sectors that clients tend to make holistic choices: they buy, or don’t buy, based on multiple aspects of their personal beliefs and they want the institutions they employ to adhere to the same values. Ethical choices and sustainability are no longer a “nice-to-have” but a “must-have – think electric cars, carbon footprint, slow fashion and produce provenance.
Yet few wealth managers really understand what all this means for the transformation of their business models and processes.
EMBRACING CHALLENGES AND CHANGE
Wealth managers that understand clients’ different lifestyle and ethical choices can use this knowledge to create personalised products and services. With the right insights and technology, this means wealth managers will be able to cater profitably to each individual client – the segment of one. It is also logical that this insight shouldn’t just influence products and services; it should be embraced by the whole brand, business model and staff at all levels. It’s no good offering ethical investments, for example, if the board is full of directors who also work for tobacco, arms or mining companies.
Knowing how to prioritise will be vital when adapting the operating model to cater to these changing circumstances. Our 2020 survey reveals where the pressure is building fastest so that banks can identify where they need to invest now, whilst also keeping an eye on the bottom line.
It seems likely, for example, that distributed ecosystems are going to play a bigger role, helping wealth managers to capitalise efficiently on opportunities offered by new technology. Seamlessly integrating third parties with specialist capabilities can allow a firm to quickly skill-up to catch a new trend, for example to differentiate its offer with non-bankable and passion assets. Not only does service outsourcing mitigate risk, it can also reduce the cost to serve.
We also anticipate that wealth managers will need a new kind of relationship manager – professionals that better resonate with clients evolving expectations. As a result, banks may have to work harder to attract the right talent, for example by recruiting from a younger and more diverse group for whom working hours, technology (such as artificial intelligence) and ethical positioning might weigh as much as, or more than, remuneration.
A ROAD MAP FOR THE FUTURE
Finally, using new technologies and managing the challenges these bring is key for business success.
Never has new technology promised so much. Artificial intelligence and machine learning are set to open a new chapter in wealth management by handling data in unprecedented ways. They will bring down the cost of effective governance and compliance, facilitate personalisation, provide an instant, comprehensive and seamless online and offline client experience and allow clients to drive and tailor their engagement and interaction with firms.
The survey shows how rivals and peers are tackling all this and more so wealth managers can prioritise their investment and change accordingly.
Feedback on the Orbium C-Level Survey 2018 underlined its value to wealth managers. The initial reaction to our new C-Level Survey has been equally enthusiastic. We believe the latest edition enables participants to adjust their own roadmaps to better meet the changes ahead and to future-proof themselves for success.