The wealth advice revolution is here, how will you adapt? – Finextra

While the wealth management sector has been something of a laggard when it comes to technology and innovation, changes in the financial services world related to regulation, compliance, competition, and client expectations mean that the sector has reached
a tipping point, and the time to evolve has arrived.

At a fundamental level, wealth management is inextricably tied to the client relationship, and historically, this need has been met effectively and without the demand for drastic innovation. Covid-19 has brought the inadequacies of this approach to the fore,
as wealth managers were no longer able to service these relationships in person.

This unprecedented situation of having to conduct meetings with clients over Zoom was a first for many clients, but it proved to usher in a new way of thinking about how wealth advice can and should be delivered.

The pressure to evolve is evidenced in the strong appetite for consolidation within wealth management firms, and while significant untapped value remains, efforts to offer an updated portfolio of products and services are hamstrung by firms’ legacy technology
stacks. These systems simply aren’t fit to address the needs of clients in the modern world.

There is a risk that wealth management clients may turn to industry newcomers such as fintech firms instead of traditional providers because they can offer a similar, or in some cases, a better and more convenient service, at a fraction of the cost. Neo-banks,
as well as fintech investment apps, are starting to close in on this space.

Several organisations have also identified that there is an underserved group in the mass affluent category. This group’s needs are beyond what a high street lender can provide, but also not at the level in either sophistication, education or size of investment
that would require the expertise of a private banker. Where once high street banks filled this gap in the market with in-branch financial advisors, since the Retail Distribution Review (RDR) regulation came into force this segment has been left unserved as
it became unprofitable.

Innovation at this intersection is required.

This piece explores the key themes and discussion explored in a virtual roundtable led by Finextra and Cognizant, titled ‘Innovation in Wealth Management: Recipes for success’. The roundtable was conducted under Chatham House Rule.

Understanding the culture of wealth management

Despite Covid-19 being an accelerator for evolution within wealth management, there is definite resistance to change within the notoriously traditional industry – predominantly from the advisors, many of who are IFAs working under a wealth management firm’s
umbrella. Most relationships were built over a number of years – and in many cases multiple generations – before Covid-19 put an end to the old-world approach. …….