Any reluctance from the wealth sector over going digital has been rendered immaterial by the coronavirus pandemic. So what does this mean for the future of the client relationship?
In a world in which our faces and fingerprints can unlock our personal tech, our phones can be used as debit cards and we can speak ‘face to face’ with people thousands of miles away, it is perhaps not surprising that, as consumers, our expectations for wealth management have also shifted.
The days of writing cheques, going into a bank to make a transaction, or relying on a single person to manage our portfolio seem archaic when we can track the progress of stocks and shares in real time from the palms of our hands.
So why has the wealth sector traditionally resisted digital developments in contrast to other industries?
“In years gone by, digital innovation was seen as a strand within a financial institution, rather than what it does,” says Jamie Broadbent, Head of Digital and Innovation at RBS International.
“More significantly, historically there was also a misconception by service providers and consumers that ‘digital’ somehow meant ‘less personal’. But that’s simply not true. Some of the most personalised experiences we receive today are on digital platforms.”
Broadbent cites the tailored digital experiences we have thanks to algorithms that collate information on our online behaviours. It’s not so much the level of personal service that has changed, but our perception of what is personal, he suggests.
Previously, the personal touch meant a named and trusted adviser who knew the ins and outs of your finances and could advise you based on your shared ambitions. Today, it means algorithms that know your interests and instincts better than many of your closest friends, leading to a bespoke curation of information based on your behaviours.
“The expectation that we now have is that, instead of being treated as a particular segment of a mass market, we’re each a segment of one,” Broadbent continues. “The hyper-personalisation we can offer via a digital channel is far superior than we could ever expect a human to be able to deliver.”
At RBS International, explains Broadbent, teams are wholly focused on a digital-first delivery of services.
“My role is about helping to transform the bank so that we can deliver the very best services and meet customer needs through the channels they expect to find us on.”
Our worlds are becoming more streamlined, adds Broadbent. “[Previously] most financial service providers have looked to deal with money and money management in isolation, rather than as part of our broader lifestyles.
“But money is intrinsically linked to just about every part of our lives – it’s tied up in our homes, where we travel, our relationships, hobbies and interests.”
Legal developments are also playing a part in the sector’s inevitable digital shift. “Family offices are now subject to a lot of compliance regulations, so where previously you could get your friendly CFO in the family business to run the office spreadsheet in his spare time, now that’s not enough,” says Rebecca Bettany, Director at JTC Private Office in Jersey.
“Consequently, families are having to institutionalise their offices, so they’re using providers like us.”
People power
For JTC, Bettany says that digital advancements are creating marked efficiencies. “We have our own software platform called Edge, which allows clients to see all of their key assets from their smartphones, including recent activity and related documentation.
“For that administration side of the business, technology reduces the chance of error, makes things faster and more thorough, and is far more cost-effective for us and our clients.”
She is quick, however, to point out that it does not mean wealth managers are out of a job. “You still need a human being to choose which information goes into the system and identify what’s relevant to discuss. Often, there’s not a right or wrong answer – instead, you need to take into account the client’s emotions, opinions and time horizons.
“It isn’t going to be a case of Video Killed the Radio Star with digital eradicating the client relationship – it still needs to be challenged and sense-checked. It can’t replace humanity.”
While the industry’s reticence to adopt digital has largely been attributed to consumer distrust of these new systems, that too is changing.
“Before now, wealth has been concentrated in the older generation, but now we’re at a tipping point where many of the highest earners are digital-native millennials who expect digital capabilities in every walk of life,” says Broadbent. “For them, not being able to do things digitally is an unwelcome friction.”
Across the generations
Bettany says that, at JTC, all generations of clients are embracing these changes. “While the young are more comfortable using tech and algorithms to shape their decision process, there are also a lot of very savvy older clients taking up the offering.
“And conversely, plenty of younger clients are more suspicious of the security angle, so that’s something that needs to be constantly reviewed.”
Again, she is keen to stress that this is not about replacing human wealth managers. “There are a lot of impressive investment funds with great returns that operate on quantum-based algorithms,” says Bettany. “But when something like quantitative easing happens, as we’ve seen over the past year, it changes the shape of the economy, so algorithms like that suddenly break down. It’s at moments like that you rely on humans to jump in to make sure that damage is not done.”
Inevitably, the shift towards digital wealth management has been hugely accelerated due to the coronavirus pandemic. “Whether or not people wanted to move into a more digital way of life, over the past year we’ve all been forced to,” says Noel McLaughlin, Managing Director of Butterfield Bank in Jersey.
As the island’s newest bank, having opened in 2018, Butterfield has been working hard to establish itself, pivoting to a digital-first approach.
“Jersey has always been well positioned for a digital future, and at Butterfield we’re almost unrecognisable after a year of digital adoption,” says McLaughlin.
That said, he’s keen to emphasise that this digital shift will not render more traditional methods completely redundant.
“Trust is so important in banking, and we’re working really hard to build long-term relationships – so while our operational mechanics now work with online banking, digital signatories and the like, we’re just augmenting the traditional side with digital capabilities.
“We would prefer to do things slowly and get it right – you only have one shot at making a good first impression.”
McLaughlin does, however, think that traditional banks are likely to move away from products and towards a more client-centric model.
“We need to get a holistic view of our clients and meet their needs – that’s how we keep and nurture the client relationship. At the moment, we’re all thirsty for a bit more human contact, and I think there’ll always be a strength in that personal connection.”
When it comes to the future, the wealth sector has some consolidating to do after a year of unprecedented digital progress.
RBS International’s Jamie Broadbent cautions against anyone moving too slowly. “We don’t have to look too far into other industries to see just how quickly market leaders can be disrupted – look at Blockbusters, Nokia and Kodak. Each owned their industry and didn’t adapt quickly enough to changing trends.
“I think the wealth sector is going to see a similar acceleration in terms of delivering personalised, bespoke services purely through digital channels – so if it isn’t a priority in institutions now, then it absolutely needs to be.”
That doesn’t, he points out, mean replacing your people – but in certain areas retooling your business will be essential.
After a year that has necessitated the shake-off of long-outdated systems and processes, the focus now needs to be on building the wealth sector of the future, says Broadbent. “If you anticipate being a fast follower in this space, you are already too late.”