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Open banking in wealth management

8 September 2020

As the importance and use of open banking grows, the wealth management sector needs to address how it will bring it onboard, says Fabrice Gouttebroze, managing director of S&G Services, part of Sirma Group.

The wealth management industry is going through a technological revolution. We’re witnessing decreases in the average age of our high-net-worth individuals (HNWI). This trend is leading to increased demand for technology solutions that enable clients to manage their money on the go, while also having the option to invest in ethical, sustainable companies and niche areas of interest.

The biggest challenge faced by many wealth managers is their outdated, legacy technology stack, which presents significant challenges to digitalisation efforts, and the firm’s ability to stay relevant and competitive for clients.

The rise of multi-banking

Clients no longer place all of their assets with one financial provider; the days of holding all of your accounts with one bank and one adviser are no more. However, wealth managers significantly increase their chances of retaining clients if they offer an excellent and personalised service. A study by Capgemini found that only 40% of HNWI are content with the level of personalisation provided by their advisory firm[1]; a statistic that goes some way to explaining why clients may use multiple advisers.

Open Banking is increasing collaboration and secure data transfer, to the benefit of multi-banked individuals. Companies that ignore this technological revolution are likely to get left behind and eventually become obsolete as client demographics, and their demands, evolve.

For younger, tech-savvy generations, the ability to view and manage all of their finances in one place, regardless of the provider, is desirable. However, this doesn’t mean that the role of a traditional wealth manager is dead; many clients still prefer this personal touch, or appreciate it as an important element of their overall experience.

New technology opportunities

Wealth managers with years of experience and a strong reputation often feel the most pain when it comes to keeping pace with technological innovation. Internal technology development projects can fail for many reasons including, a lack of expertise, spiralling costs, a long lead time and technical complexity due to legacy systems.

One solution to this challenge is to work with a more agile fintech partner, who through an application programming interface (API), can create a client-centric and customisable online experience, that integrates with internal systems. The digitalisation opportunities for the Wealth Management industry are significant; for example, through an API, you could develop an engaging, personalised mobile interface for your more tech-savvy clients. Video banking, electronic signatures and biometric authentication enable you to give your clients a convenient and secure face-to-face experience as they travel.

Technological solutions based on artificial intelligence (AI), such as robo-advice, are even opening up the wealth management industry to retail clients. These individuals are underserved by the traditional financial advice model where the minimum fees can be too high for the relative size of their investments.

Is open banking technology the answer to differentiation in wealth management?

Open Banking is a strong catalyst for wealth managers to innovate with their technologies, as are factors such as the continually evolving regulatory requirements and client preferences.

Wealth managers who truly embrace digitalisation can free themselves from volumes of administrative work, they can meet the technology demands of their tech-savvy clients and possess more robust data to base investment strategies on. These are potent attributes when combined with the reputation and human touch of a wealth manager who truly knows clients as individuals.

The wealth managers who differentiate themselves for the long term will offer market-leading advice, an excellent service and seamless, personalised digitalised experiences; often in collaboration with a specialist fintech partner.

(1) Capgemini, World Wealth Report 2019

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