Wealth management is in the grip of a digital revolution. The sun is setting on the days when a private banker and client met once a quarter in a discreet club room for an amiable chat about portfolio options.
Today, high net worth individuals conduct 44% of their wealth management interactions online and that figure climbs to 48% for clients worth $20 million or more, according to research by FactSet, a digital solutions market leader. Asian investors take the lead here with over 50% of interactions conducted online vs. their European and North American peers.
This evolution means that to meet the needs of their increasingly tech-savvy clients, private banks must turn to digital solutions or face losing a new generation of clients to competitors that recognize the future of wealth management.
Changing Mindsets
Many private bankers are reluctant to react to the digital revolution. They are missing a huge opportunity, according to Philipp Zerhusen, Director of Market Developments for FactSet Digital Solutions.
“Whenever you touch the holy grail of private banking involving high net worth and ultra high net worth clients, the private banker and the head of department are usually very reserved and averse to the new technology,” he said.
“They say their clients always prefer this very personal approach, but I seriously think that premium end clients want at least the same digital service as any high street customer with a good online client service.”
This reticence brings with it the risk of undermining long-standing client relationships. “High net worth clients can afford all the latest technological tools, so if you as the private bank do not create such a service, someone else will,” said Zerhusen.
Human Programming
Paradoxically, the introduction of technology has the potential to enhance—not diminish—client relations.
FactSet promotes a hybrid model that combines person-to-person interaction with a digital model to create what Zerhusen calls “a truly winning wealth management proposition.”
Digital options actually increase client contact, with one major study finding that the introduction of online wealth management channels drastically raises the level of interaction between banker and client, from five-10 times a year to 150-250 times.
The application of Artificial Intelligence (AI) into digital systems allows wealth management systems to be highly personalized and to react instantly to sectors and trends that match an individual client’s interests and goals.
“The fear that private banks are going to lose client contact is misplaced – it is actually the reverse,” Zerhusen explained. “It is a question of whether wealth managers are ready for that tsunami of client interactions.”
Intelligent Advances
The possibilities for personalization are almost limitless. Private banks can potentially offer as many individual investment strategies as they have clients, says Zerhusen.
“Technology and AI are at an advanced enough state to be utilized in compelling solutions, which will provide better and more personalized investment advice than ever before,” he said.
In a rapidly-changing digital environment, the time for private banks to embrace change is now.
“Technological progress is exponential,” said Zerhusen. “Once it breaks the surface and becomes visible, it is almost too late to catch up.”
This article originally ran on Asian Private Banker
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