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Mark Trousdale, Chief Marketing Officer, InvestCloud

As more Covid restrictions lift around the world, there has been an inevitable fresh frenzy of opinions shared over the role the office will play in the future working world. But for wealth managers, another more pressing hybrid working scenario is front of mind: to what extent will client relationships return to direct and in-person interactions, and how do client preferences on this pressing issue differ across the wealth continuum?

by Mark Trousdale, Chief Marketing Officer, InvestCloud

In this business of relationships, the white-glove service traditionally demanded by high-net-worth individuals (HNWIs) might seem like a harbinger of a return to the more traditional routine of face-to-face meetings and phone calls. But don’t be so sure.

After two years of tumultuous change, the expectations and preferences of how the world’s most affluent want to engage with their wealth managers and financial advisors have shifted dramatically – and had been doing so for some time before. Already many HNWIs used online banking and enjoyed the convenience of digital tools in other areas of their lives, across the age spectrum. And the shift to digital accelerated by the pandemic seems only set to increase amid the mind-boggling $68 trillion baby boomers are expected to pass on to younger, more tech-savvy generations. Add to this a greater emphasis on transparency and a desire to play a more active role in their investments – including to invest differently as the ESG movement takes off – and it’s clear HNWIs today want a much more personalized and intuitive digital experience from their wealth manager.

So how can wealth managers and advisors translate the same high-touch offline experience into the digital arena, and what advantages can this bring to their business?

Remodelling the digital experience for HNWIs

The conflation of the broad possibilities of digital advice with the more narrow purview of Robo advice has led some to discount digital for certain segments of the industry. Some try to discount the importance of digital because it is often thought of as only catering to the mass market – for example, pointing out that simple onboarding questionnaires create a one-size-fits-all approach that can never meet the sophisticated needs of HNWIs. But this misses the broader capabilities of digital.

We need a new model for how clients can interact with their wealth digitally – one attuned to their unique needs and preferences. This is critical whether you look at excellence in client communications or planning. And indeed it’s as much about flexibility in the experience and understandability (intuitiveness) as it is about reflecting that you understand and share the feelings of your clients, digitally. This is what is called ‘digital empathy’. The future of wealth management relies on this, particularly because it is true for all levels of wealth and especially so for HNWIs.

To achieve digital empathy for excellence in communication and planning, wealth managers need to recognize and deliver digital solutions to suit a range of unique digital client personas that go far beyond traditional wealth segmentation by age, gender, wealth and the like. They should incorporate characteristics such as financial interests, ESG values, digital savviness, approach to digesting information and appetite to set life goals. This means portfolios and products – and equally digital experiences – are fit around the client and not the other way around.

For instance, many HNWIs are increasingly demonstrating the desire to be increasingly involved in their investments. With deep knowledge and interest in financial markets, they want to play a more hands-on role in their investments – and align them to their values. They may want to sign off on all investment decisions or have a portion of funds to tinker with themselves. Educational tools rather than overly managed or advised solutions will speak best to them, helping them build investment models or recommend different products to try. But chat, video calls and other digital communication channels to their financial advisor should remain open when needed. The key is that they call the shots.

Other HNWIs – though increasingly fewer – may want a more traditional approach. These might still like to receive PDF reports – which can certainly be done more efficiently digitally using publication to a client portal. They may check their investments online but need the reassurance of speaking to their advisor in person or on the phone before making decisions.

It’s about picking the right model for the right client. Equally, it’s not about supplanting human advice outright but supplementing and enhancing it with what’s possible in digital.

End-to-end financial planning

Everybody needs a financial plan. That’s true no matter your level of wealth or life stage – whether that’s saving for a house, your child’s education, buying a second home or managing cash flow. But the fact is that HNWIs have more nuanced financial complexities to contend with – from tax, real estate and cash flow management to business succession planning – that require the specialist know-how of a financial planner armed with the right digital tools for maximum operational efficiency.

The problem is this service to date has been very fragmented. A financial planner would produce a comprehensive and lengthy plan and may recommend a private bank to help implement it, but the burden ultimately fell back on the HNWI (hardly a white-glove service). But in a digital environment, this process can be much more joined-up; an advisor can build a bespoke plan and, in the same stroke, recommend complementary products and solutions to help clients achieve their financial goals. All while communicating effectively about the plan. This is much more seamless, convenient and understandable for end clients.

Increasing client engagement at scale

HNWIs are often considered wealth managers’ most prized and sought-after clients, but increasingly they are not the most lucrative. According to Capgemini, while HNWI wealth is up over 70% since 2008, profitability has decreased for wealth management firms. They may bring in vast sums of wealth to manage, but servicing this is often very labour intensive and squeezes margins. And this means all the best client engagement in the world could still fail to support the business.

Identifying high-friction automatable workflows is the first step to achieving high-quality service at scale – processes like prospecting, onboarding and cashflow forecasting. The second piece of the puzzle is to partner well to benefit from intelligent digital tools to enhance operational efficiency. It’s a decreasing but still fairly commonly held false belief that advisors need to be the best at building technology. Whereas the truth is they need to be the best at advice and wealth management and partner well.

A great example of automation is the operational efficiency that AI-driven Next Best Action recommendations can bring to the industry. Machine learning trained on client data can provide key insights into how clients interact with their wealth online. Marry that with automated research analysis using natural language processing and AI, and advisors can quickly start to generate custom recommendations for products and actions in a client portfolio that are as personalized as clients really expect top-notch wealth managers to be these days. This means that advisors can intervene and engage with clients efficiently by knowing exactly when and how to give the best advice.

We are still just on the cusp of seeing how digital tools like these can help propel the wealth industry forward. Wealth managers should embrace this and not harbour any preconceived notions that their HNWI clients are eager to return to the old ways of interacting. It is about planning, communicating, and implementing the right hybrid mix of advice that best fits the client while always looking for opportunities to harness the greater degrees of personalization now possible in digital. That is the level of service clients expect. And luckily, it doesn’t have to come at the cost of scale.

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