Attracting and retaining clients – Part I. / – Innovation – How to keep up the pace

With the entry of fintechs and neobanks into the wealth management industry, incumbent banks stepping up their wealth game, the increasing demand for digital, personalised service and, of course, shifts in business processes and client servicing brought about by the pandemic, traditional wealth managers need to step up their game in order to retain their customers and attract new ones.

In this blog series, we will take a look at the biggest challenges wealth management companies face today in keeping and expanding their customer base and key strategies they can implement to overcome these difficulties.

Innovation takes the spotlight in the first part of our series. Innovation is a key ingredient of successful client retention and acquisition, one that every player turns to from time to time but not many manage to consistently stick to and stay ahead of the curve.

What it really means to be innovative

In the years leading up to the pandemic, many firms had started describing themselves with buzzwords such as “agile”, “innovative” or “flexible”. Some made changes to business processes and company structure, IT systems were modernised, digital solutions implemented and many of these were backed by media campaigns.

Then came the pandemic and put the resilience of these companies to the test. Some were successful in adapting to the new norm, but many have failed despite their promises and efforts and had to close up shop, consolidate their business or have been struggling since. No matter the outcome, the situation was tough for most wealth firms, but smaller, traditional wealth management companies and wealth boutiques were hit especially hard due to limited human resources, rigid processes, outdated leadership practices and no financial means to upgrade entire IT systems and digital platforms.

If we think about it, the pandemic was sort of a vis major situation with respect to innovation – a true test of flexibility and adaptability. It required similar response – albeit at a bigger scale – to what major market shifts and shocks do, occurrences such as the emergence of new products (ESG, digital assets) or the implementation of major legislation (MiFID, SFDR).

To be able to confidently weather these market shocks (even unprecedented ones like the pandemic), wealth managers must think about innovation as a constant, continuous element of their operation rather than something that they can pull out the bag. When you can already feel that market trends are shifting and it is time to evolve, it usually means that you are going to be playing catch-up. This is true now more than ever as the intergenerational wealth transfer approaches bringing about an increasing demand for fresh ideas and constantly changing client preferences.

How to stay ahead of the curve

Thankfully, there are a few practices and solutions wealth managers can implement that can help them stay innovative in the long run. First, leaders should start paying attention to new trends in the industry and start thinking about incorporating them into their business process as early as possible so that their firms can be among the first to take advantage. They should also encourage their colleagues to challenge the status quo and be open to new ideas and solutions.

Forward-thinking work cultures go hand-in-hand with modern and efficient work methodologies such as agile, and state-of-the-art IT solutions like modular core-to-front office platforms and client-facing portals in Software-as-a-Service, Infrastructure-as-a-Service or Platform-as-a-Service

  • Agile is a form of project management and software development methodology that allows teams to respond to market shocks and customer feedback continuously and efficiently without compromising previous progress on the project. This is achieved by forming self-organising, cross-functional teams who ship solutions in smaller increments and use feedback cycles and continuous learning in between.
  • Modular core systems and client applications have been gaining traction in recent years with the rise of neobanks and the “digital-first” wave. At their heart, modular software solutions allow future access to the latest features and services without the risks and costs of swapping out the entire system. This is achieved by having a more or less fixed core functionality, while the rest of the services or “modules” are selected by the customer based on what fits their service portfolio best. These modules are independent components that communicate with each other using APIs and microservices, requiring little tweaking or development.
  • Financial services providers are moving to the cloud as an increasing number of software implementations are done in a Software-as-a-Service (SaaS), Infrastructure-as-a-Service (IaaS) or Platform-as-a-Service (PaaS) model. With traditional “on premise” implementations, customers have to buy, install, maintain and update hardware and software components required to run the solution, which boosts up-front costs and the level of risk. With the above mentioned “as-a-Service” types, the vendor takes care of most of these requirements, and you only have to decide how much you want to manage yourself. SaaS utilises the cloud to deliver applications, PaaS provides the environment (the platform) to create applications, while IaaS is fully self-service, providing highly scalable and automated computing resources, allowing customers to purchase hardware and software resources on-demand and as needed instead of having to purchase, install and maintain the resources themselves.

Lastly, wealth firms should also decide if they want to develop these solutions in-house and have greater control over their innovation process or work with an outside partner, such as a fintech company. that has the resources and know-how readily available to deliver these projects.

These are elements that wealth managers need to start thinking about as possible futureproofing tools. The market leaders of the next decade will be the ones that learn to constantly reinvent themselves now, as the market itself is currently undergoing huge changes that can catch even the biggest players off guard. These firms will ensure that their current customers are satisfied, and they are going to be in a prime position to successfully attract the new generation of investors.

Check back for the next blog post from our series to get an in-depth look at customer retention in the wealth management industry!

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