Your practice needs total digital transformation

Business improves when advisers upgrade technology for client acquisitions, account servicing and asset growth.
DEC 06, 2017

Offer any Wall Street firm the chance to boost annual revenues by nearly 10% while growing market share and boosting productivity of key employees, and most chief executives would jump at the chance without hesitation. That may sound like a fantasy, but that's happening at wealth management firms that are advanced in their digital transformation. Firms with a mature digital business are seeing annual revenues rise by 8.6% and market share grow by 6.3% while their advisers are 11.3% more productive. Those are among the findings of Roubini ThoughtLab's Wealth and Asset Management 2022: The Path to Digital Leadership. The report portrays a wealth industry that's finally fully convinced of the need to go digital: Whereas last year, 24% of CEOs viewed digital transformation as unimportant or only slightly important to their business, this year 96% say digital transformation is crucial. TECH SEA CHANGE This sea change comes as wealth management is being disrupted. Facing robo-adviser competition, most firms have incorporated that technology into their offering—their advisers are now "bionic," blending human advice with the best of technology. A secular downward trend of lower fees and margin compression has been exacerbated by the U.S. Department of Labor's fiduciary rule, and by a consumer shift to passive investing and low-cost products. As Google, Apple, Amazon and others drive fintech innovation at a dizzy pace, some Wall Street firms are struggling to keep up. Four out of every five retail banks have been slow to create smart beta products that offer low-cost, passive investing strategies, 71% of broker-dealers feel unready for fintech disruption and 50% of asset managers are struggling to help clients set holistic goals. Such personalized service is increasingly important as consumers expect wealth management to be as customer friendly as products from Apple or Amazon. The good news is that no set of firms dominates wealth management in the digital age, so wealth managers can still succeed if they invest in digital transformation. Firms that have fully embraced digital spend 11.6% of their revenue on technology, and plan to boost that to 17% by 2022. Those investments can produce average ROI as high as 5.5% of annual revenues each year for five years. The survey of 1,503 firms categorized 29% as digital leaders with a mature digital business, 48% as transitioning to digital, while 23% are at the beginning of that journey. Digital leaders get 32% of revenues from digital channels, and expect to reach 48% by 2022. ​ WEALTH TRANSFER Getting digital right is especially important as the industry expects a $30 trillion wealth transfer in the coming generation. Most firms are investing already in digital, but many are not doing enough. Too often investments aim to improve one aspect of a firm's offering, whether that's adding a robo-platform or social media marketing tools. What's needed is a digital transformation that updates everything, from client acquisition to servicing accounts and growing assets under management. As firms leverage such technologies as analytics and artificial intelligence to better target prospects, advisers may spend 30% less time prospecting for business but they will acquire more new customers from that effort. The coming disruption requires firms to have a digital vision that is supported by a business case, and then digitally transforming the entire business. Firms must embrace a culture of innovation, adopt a customer-centric mindset, and use agile development methods used in Silicon Valley to develop products. The alternative is moving too slowly, resulting in losing $79 million for every billion dollars of annual revenue and perhaps, in the end, failing. Steve Scruton is president at Broadridge Advisor Solutions.

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