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Humans vs. Robots!

CONTEXT

I was recently asked for my view on the talent landscape in the Singapore wealth management industry, especially given the recent wave of consolidation in the industry (i.e. concerns that there will be mass job losses), as well as the threat of automation and digital transformation to what has long been a business inter-mediated by human professionals (ditto).

It is true that over the last three years, we have seen Indosuez acquire CIC’s wealth business in Singapore and Hong Kong, OCBC purchase NAB’s Singapore and Hong Kong wealth business as well as the Singapore/Hong Kong wealth business of Barclays, and DBS’ acquisition of Societe Generale and ANZ’s Asian wealth management businesses, respectively. These are by no means all of the examples, so clearly this is an industry in flux.

At the same time, digital transformation continues to sweep through the front, middle, and back office of wealth management firms (although some would argue not quickly enough, given the still-archaic client experience many firms offer).

 

STEPPING BACK – A HISTORICAL VIEW

The fear of job losses from technology is not a new concept. Consider the Luddites of the early 19th century, and even famed economist John Maynard Keynes in 1933, stating, “Automation outruns the pace we can find new uses for labor”.

What is important is to understand the nature of jobs and talent. I recently encountered interesting research from the University of Chicago (Gibbs et al.) showing that there are four job characteristics: Interdependence; Multi-tasking; Discretion; Skills, and that jobs where these factors are all important tend to be heavy on R&D and IT spending, and are hard to automate.

Throughout time, when there has been a technology impact on jobs, it comes in two forms, either as a substitute or as a complement. While one could argue that the pace of technology disruption has been increasing since the 1980s, it has always been there.

Lately, we have seen lots of sensationalist headlines in the press, such as how “47% of all jobs are likely to be eliminated by technology” (with most quoting from, “The Future of Employment: How Susceptible Are Jobs to Computerisation?,” by Dr Michael A. Osborne from Oxford University’s Department of Engineering Science and Dr Carl Benedikt Frey of the Oxford Martin School).

However the reality that is often over-looked is that traditional jobs will be “unbundled”, with technology automation freeing up humans to do the more engaging and high-value part of the job better and more efficiently. An analysis from the OECD bears this out, with something in the region of 8% of jobs being lost (but made up for by new jobs being created).

The implications are stark. Cognitive skills and social skills will be most in-demand and impossible to automate away for the foreseeable future (at least until AI gets “smarter)”. At the same time, some people will lose out, and governments will need to step-in to support the change and maintain societal harmony as best they can. At an industry-level, firms, regulators, and educational institutes will need to work together to prepare young people for jobs of the future and support re-skilling of displaced workers.

 

WHAT DOES IT ALL MEAN FOR SINGAPORE WEALTH MANAGEMENT?

Now to turn back to the crux of the question posed to me last week. What is my view on the future of the Singapore wealth management industry given these global and industry-level disruptions?

Our first lens is the client lens. The first thing to understand is that the Asian wealth management industry is a booming industry, with more and more HNW clients being created each year, with the region serving as the global engine room for new wealth creation. At the same time, client needs are ever more complex, with increasing investor sophistication, multi-jurisdictional business and family lives, and a general trend towards information overload.

On the firm side, there are major challenges to convert the growth in the client base into assets under management. Even when firms can do this, client behavior, regulatory and technology investment, and the existing interest rate environment ensure that profits are constrained. As a result, wealth management firms will always seek to automate and offshore roles, as this is a natural part of capitalism and something they must do in order to deliver shareholder value and improve weak profit margins.

The situation with talent in Singapore wealth management is strained. More specifically, the situation is as follows:

  • GROWTH: Growth of new wealthy clients is far out-stripping supply of new advisors
  • DEMANDS: Clients are more sophisticated, putting increased demands on advisors
  • AGE: Many advisors are older, and do not understand needs/outlook of spouse and younger HNWIs
  • QUALITY: In many emerging markets, quality of talent and financial acumen is severely limited

So what is the future requirement for the talent model in Singapore? Digital is key to scale the business model and serve more clients more effectively. For example in the front office, digital technology can enable increased democratization of wealth management via digital self-service tools. Such tools give more people access to self-service research and digital portfolio management (tools previously restricted to the upper end of wealthy clients). In the back and middle office, increased automation will help improve the quality, speed, and efficiency of firm operations. Human talent will remain critical, and will be in keeping with the “complement” impact of technology mentioned earlier. Human talent and technology will form a hybrid team, with traditional jobs unbundled to allow technology to handle the more repetitive and non-value-adding tasks, freeing up human talent to focus on areas that will be hard for computers to replicate (such as building client intimacy, collaborating to find the best solutions, and negotiating).

As a result, recruitment emphasis will shift. Wealth manager hiring will focus on those with high EQ, who can use the free time enabled by automation to deepen relationships and make more connections across the ecosystem. Advisor hiring will also focus on those with real skills and proven ability (or at least strong potential) to build a wealth practice, and across the organization, there will be a strong focus on recruiting digital natives who can naturally blend with technology. Lastly, new roles will be sought to displace jobs that may be less relevant in the new industry construct – the so-called “creative disruption” that helps to mitigate the extent of job losses (along with the un-bundling mentioned earlier).

Naturally, industry stakeholders will need to offer a lot of support as the talent model evolves. Training will be key, as re-skilling will be needed, especially in middle and back office roles that endure the most automation. Firms as well as regulators and educational institutes have a role to play here. There will also likely be a role for government support, especially in the areas most impacted by automation.

 

WHICH ROLES ARE MOST IN-DEMAND IN SINGAPORE WEALTH MANAGEMENT?

I believe the industry can absorb technology into the business model without causing mass unemployment, and so I want to share where I see a lot of the hiring interest in the industry. I meet leaders of wealth firms regularly, and one thing that is consistent is that they are looking for good people; however it is a quality over quantity view. As a result, many firms are struggling significantly to fill the position that they do have.

Where do I see growth/demand for roles? There are many, but to give a few examples:

  • Wealth/relationship managers… but not pure sales people… the key is to have EQ, an existing track record as a trusted advisor to clients, and an ability to coordinate across a variety of stakeholders in order to develop winning propositions for clients. A specific in-demand skill such as financial planning expertise would also be greatly valued.
  • Innovation leads/roles… there is huge demand around digital innovation, especially in Singapore… firms are active but nobody has really cracked how to make a success of it… lots of potential roles, from Fintech ecosystem managers, to full-stack developers, to change management professionals.
  • Proposition development… client needs, regulations, and profit needs are driving a major re-look at propositions in a still-competitive industry… as a result, lots of demand for roles such as customer journey leads, data scientists and insight leads.

A few closing points. First, the roles most in-demand in the future will be those that combine a strong focus on cognitive and social skills, which the above roles certainly require. Secondly, in the history of artificial intelligence, there are often spurts and a lot of hype, but then a lag before implementation of AI really takes off.

This “implementation lag” gives the global economy and Singapore’s wealth management industry the time required to adapt, though it will not happen by itself and requires concerted action from many stakeholders.

 

David

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