The Evolving Role of Wealth Management in the Digital Future 

As per the survey conducted by Wealth and Asset Management, 80% of modern investors prefer using mobile applications to monitor their investments and connect with advisors. And more than 40% of investors now demand digital access to their accounts. Modern-day technology fosters new capabilities via mobile interaction and plays a vital role in reshaping the wealth management industry. Wealth management has always been a significant industry, swiftly evolving and changing, driven by technological advancements. Being a sector with enduring growth potential, it plays a vital role in the financial well-being of an increasingly wide range of customers. 

In India, the economy continues to evolve and develop, and so does the need for effective wealth management. In recent years, India has witnessed an increased number of services offered, new players entering the market, and significant investments in cutting-edge technology. With the increased sophistication of investors and the availability of new financial products, the wealth management industry is rapidly changing. 

According to Forbes, digital technologies are acting as catalysts for wealth management disruption, carried out by independent financial advisors and digital-first-startups with inventory management plans (IMP). It predicts that the number of domestic millionaires and billionaires will rise further, and India’s GDP will rank third in the world by 2030. Modifying regulation and technology is crucial for India’s wealth management organisations to compete with their international competitors. From rising competition to regulatory changes, the wealth management industry faces several challenges in India and globally. As more and more players enter the market, the competition for customers is surging, leading to higher pressure on fees and services. In addition, regulations have also become more rigid, which further leads to increased compliance costs and increased security from regulators. 

Simultaneously, the industry has also seen growth with the increased use of digital tools and the introduction of advanced technologies. Additionally, the expectations of both advisors and investors are changing rapidly with the involvement of digital technologies. Advisors’ compensation structure has changed from traditional commission-based models to goal-based frameworks. Advisors are suggested to get deep insights about their investors so that they can provide them with hyper-personalised services. As more and more advisors retire from the industry and the next generation of advisors joins in, they will look to bridge the gap between tradition and innovation. 

Keeping that in mind, it is pivotal for leaders to understand exactly how advanced technologies intend to augment advisors’ expertise in the wealth management industry. There are multiple factors that are fueling this industry and transforming it positively, but the key among them is the change in the expectations of the investors. Advanced technology is reshaping how investors see their partnerships with their advisors. The key factors evolving and driving the transformation in the wealth management industry include:

  • The rise of robo-advisors.
  • The demographic shift of wealth.
  • Increasing regulatory burdens. 

According to Forbes, digital technology is a critical factor in disrupting the banking and financial service industry. The wealth management industry is no exception in this regard and is significantly impacted by the technology and innovation revolution. The actionable insights acquired from cloud-based platforms leverage data for richer insights, increased visibility through integrations like operational control with interconnected products and services, open AI architecture, and interconnectedness—connection with other wealth management firms that further expand the offerings. Other trends and technological advancements that contribute to the growth of the wealth management industry include goal-based investing, robo-advisors, demographic transition, sustainable investing, and extreme personalisation via a state-of-the-art CRM. 

Many wealth management firms have already taken action by acquiring FinTech and robo-advisers and integrating them into their existing services. American multinational investment banks Morgan Stanley and Goldman Sachs have obtained E-Trade and United Capital. Whereas, Vanguard and Schwab already provide automated solutions that easily streamline their wealth management client onboarding process. Technology has been playing a significant role in modernising traditional systems. Analytics from the advisory world expects groups like Google, Amazon, and Facebook to enter the wealth management space and take the industry to the next level. 

Capgemini, in a recent 2023 wealth management trend analysis, envisaged that industry consolidation would continue in the future. The mergers & acquisitions of other companies will boost a firm’s capabilities to reach new customers, segments, and markets with new products and services. The established, digitally mature wealth management firms have already witnessed improvements across key performance indicators. For instance, many firms have reported a 13% increase in productivity, leading to an 8% increase in assets under management (AUM) and about an 8% increase in revenue. Overall, they get a 7.3% hike in market share and increased their shareholder value by nearly 6%. This reflects the fact that neglecting digital transformation is no longer an option for wealth management firms, but rather a dire need to fill the gap between the traditional business models and the rising demands of customers for digital services.

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