Published: 18 December 2019 Author: Nael Shahbaz We’ve seen how the FinTech disruption has taken the consumer banking industry by storm in recent years. New offerings by innovative startups have truly revolutionised the way the financial sector operates, with investments reaching US$53.5billion in 2019 alone. The indication is now of similar spillover effects for the asset and wealth management sector. As a caveat, research from PWC shows that asset and wealth managers may not be ready to embrace the change fully. A FinTech focused strategy is required to take full advantage of key developments in the market, but most firms are not seen to be doing that. While they understand that FinTech is impacting customer needs and that firms must adapt to contemporary trends, most are not seeking investments in this direction. Analytics and asset allocation remain top priorities in this sector as far as investments in new technologies are concerned. Trends in adoption of technology in the asset and investment sector also hint at how the FinTech wave is being underestimated. A third of asset and wealth managers are not engaging with new FinTech entrants and have not built a strategy to integrate their services. About 81% of banks already offer or plan to develop a mobile app to serve customers, as opposed to only 31% of asset and wealth managers. It is also true that investment and wealth management firms have had a variety of other issues to face while the FinTech wave was in full force. High regulatory pressure, as well as the introduction of passive funds, is challenging the financial viability of many industry leaders in wealth management. Currently, there’s pressure on profit margins and a responsive digital strategy is an impending business need. Since digital wealth management has a lot to do with high net worth individuals, their preference for digital tools must be accounted for. For 2020, therefore, the asset and investment management sector must rely on a more profound commitment to digital engagement, and look for more lasting ways to either fight or engage FinTech competition. The first step in digitization of investment is to develop a customer-centric approach that leverages automation, digital experience, and human support to streamline customer analysis strategies. This goes a long way in building customer relationships and providing advice to clients, for instance, with fewer total assets. Moreover, automation of investment procedures makes it easier to monitor portfolios and do-away with time zone differences. In addition to streamlining investment solutions for mutual funds and bonds, the coming years will apply automation to leveraged instruments and structured investments made in real-time. Robo-advisors have not fared well in the ending year of 2019, with most firms folding such propositions. However, their impact on enhancing digital experience is palpable, especially in terms of enabling higher technology turnovers and reducing friction in transactions. Simply creating broad and multi-source datasets can make them authorities on customised solutions based on real life expectations. Recently, alternative business models, such as crowdsourcing, have helped customers revisit the way investments are made and intelligence is shared. In future, the key is to benefit from community-building services that engage customers in an attempt to maximise investment facilitation. Platforms that bring together financial advisors and investors are likely to promote user-generated queries that further enhance experience. An inescapable reality for adaptation to most FinTech disruptions is the way security will be prioritised by incumbent wealth management firms. Innovations in how privacy and security are administered will have considerable bearing on their long-term success. In this regard, identity verification and screening services that provide ample fraud protection layers are mandatory integrations. As a way forward, asset and wealth managers are better off working in collaboration with FinTech players, as opposed to developing their own strategies from scratch. At the moment, only 27% of CEOs are leaning towards the idea, a startling data point. A more digitized and integrated asset management approach in 2020 would be to look for opportunities that enable the use of technology and lead to higher revenues, better compliance and higher trade efficiency. With visionary adoption of disruptive technology, the asset and wealth management sector will begin to show trends similar to what we saw for the banking industry when FinTech was in its nascent stage.

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Nael Shahbaz is a digital marketer with a demonstrated history of working in the financial services industry. Read more of his work in our book The WealthTECH book, where Nael is one of our co-authors.

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