Wealth Management in the Digital Age (Savvy Investor Awards 2016, Winner)

In March 2016, I authored a white paper with a colleague and in collaboration with Salesforce, looking in-depth on digital disruption in wealth management and the impact on the value proposition of wealth managers. We were fortunate enough to have been selected as the winner of the Savvy Investor Awards 2016 – Best Wealth Management White Paper (beating some strong competition – see

In light of this, I wanted to share the introduction to the paper as a brief teaser, as well as a couple of the key charts/visuals. However the paper is very rich, so do check out the full report (free to download) from


While global high net worth individual (HNWI) wealth is at an all-time record and is up over 70% since 2008, this wealth growth has coincided with decreased profitability for wealth management firms.

One of the biggest challenges for firms when addressing the revenue and profit dilemma is to effectively leverage digital technology and the latest in cloud platforms to transform their businesses. For example, our research shows that 47% of wealth managers globally are not satisfied with the digital tools provided to them by their firms. The dynamic is compounded as the majority of HNWIs state they will leave their wealth management firm for the lack of an integrated channel experience.

Beyond just retaining existing HNW clients and wealth managers, the ability to leverage digital technology to attract new clients and revenue through data-enabled propositions for clients will be critical to firms’ profitability in the future.

One of the most critical dimensions to building digital capability is the ability to tap into new data possibilities and the rapid evolution of third-party FinTech firms, to bring the best capability to clients. Platforms such as those leveraging cloud computing technology may offer firms immediate revenue-generating possibilities on top of wealth manager productivity and efficiency gains, while also serving as a future-proof and scalable platform to keep up with the fast pace of technological change, especially the evolving FinTech ecosystem.


Regardless of region, age, or level of wealth, there is significant risk of HNWIs leaving their wealth management firm for a lack of an integrated channel experience. The highest risk is in developing regions and amongst the younger population of HNWIs, but is sufficiently elevated to be a concern regardless of demographic factors.

Played out in a business scenario, the results would be significant, both to wealth managers and their firms. As the exhibit below shows, in the most extreme scenario of digital attrition, firms would and wealth managers lose an estimated 56-64% of their net income.

While these scenarios are highly unlikely since attrition would be more phased over time (and very few firms would take no action), it nonetheless paints a clear picture of the amount of profit at stake as the industry transforms.



Firms and wealth managers face a host of industry challenges, including ongoing issues such as shifting HNW client behaviors (including high levels of cash), regulatory and cost pressures, and more recent threats from new entrants, all of which are driving the evolution of the wealth manager’s role.

While the longer-standing issues are well-known to firms, the disruption from new entrants (particularly automated advisory services, or as some know them, “robo-advisors”), presents a significant challenge as well as an opportunity.

All of these factors are driving an evolution in the wealth manager value proposition across multiple areas (see Exhibit). While some aspects have been in transition for several years and there are global nuances, the difference now is in the convergence of areas and accelerated pace of change. In summary, these changes are:

  • Growing prominence of fee-based and discretionary solutions. Regulations and client demand have shifted the focus of many wealth managers and firms from commission or advice-based solutions toward fee-based or discretionary products.
  • Focus on behavior-based segmentation. Segmentation of clients has evolved from traditional techniques based on HNWI age, wealth level, and risk profile, to advanced approaches based on HNWI behaviors.
  • Utilizing open architecture to offer varied products. The adoption of open architecture is allowing wealth managers to offer HNWIs access to investments that were previously available only to institutional investors, rather than relying on the proprietary offerings of the firm.
  • Shift toward a goals-based, holistic approach to wealth management. Advice and solutions have evolved from suggesting plain and simple products (equities, bonds, and mutual funds) to adopting a goals-based, holistic approach to wealth management encompassing cash, credit, tax, estate planning, insurance, philanthropy, and succession planning, both for businesses and personal wealth.
  • Delivery of the full capability of the firm. Along with the shift to delivering a more holistic approach to wealth management advice, the core focus of the relationship between the HNWI and the wealth manager has expanded such that wealth managers increasingly act as conduits to provide HNWIs with access to a broad range of experts from across the firm.
  • Use of multiple channels. The traditional method of dialogue between HNWIs and firms has evolved from a single face-to-face channel, to a more integrated multiple channel experience, with the goal of providing clients a consistent, personalized, anytime/anywhere, seamless experience across all channels, including digital.
  • Increasing shift toward goals-based performance measurement. The investment management process has evolved from a pure transaction-based model that measures success based on relative returns, to a financial planning model that measures success against the broad range of needs and concerns of HNWIs to achieve a more relevant and personalized goals-based performance measurement.

The imperative for wealth managers to embrace a holistic approach toward financial planning and wealth management is clear, and by adapting to the new environment, wealth managers can turn the disruption wrought by automated advisory services into opportunity. As basic asset allocation, investment advisory, and risk profiling services become commoditized, the value proposition of wealth managers is transitioning. It is moving away from stock selection and investment management, toward more holistic financial planning. With the transition already underway, leading wealth management firms are ramping up their investments in capabilities related to financial planning.



Firms need to build a multi-faceted transformation roadmap, that puts digital at the very heart of business.

In addition, there will be critical capabilities required by wealth managers, which are critical to addressing HNWI needs. The most important of these are wealth-planning tools, such as scenario planning and asset allocation, as well as the ability to have access to experts, such as legal, tax, and philanthropy at the firm and through third parties. Both of these capabilities must be digitally-enabled and can serve not just as a defensive measure to retain HNW clients, but also as a revenue-generating tool by building differentiated value propositions in the areas that HWNIs value.

It is important to note that wealth managers and even their firms cannot have all of the financial planning and expert capabilities that HNWIs need. At the same time that third-party FinTech firms are increasing in both number and sophistication for wealth management capabilities, it is therefore critical for a wealth management firm to be able to tap into a platform that leverages advanced application programming interface (APIs) and integration with current and future third-party tools, allowing wealth managers a range of options on how they customize their service approach to meet HNWIs’ needs.

Another key capability demanded by wealth managers is to have hassle-free account opening procedures, a development that could see innovative concepts such as e-signatures become more mainstream. These new account opening tools allow for not only a far smoother customer experience during the critical 90-day referral window, but also offer firms a more robust capability for regulatory compliance around know-your-customer requirements.


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