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Tuesday 25 August 2020

The Evolving Model of Wealth Management

It would be a strong, yet fair claim to make, that banks have had to change their business models more than any other industry. New technology and capabilities which have been accelerated through the COVID pandemic have further disrupted banking including the hitherto slow-moving wealth management business. This has shown the importance and growth of digital banking, but with change comes caution and fear so it still remains key for banks to maintain the human, trusted side of advising on wealth. The question is whether financial institutions will remain committed to the new models which have evolved during the crisis? 

COVID-19 has required a “double down” on technology solutions

The Covid-19 pandemic has required changes in behaviour from both clients and their advisors – and placed greater emphasis on digital solutions enabling remote engagement rather than face to face interactions. No longer can digital projects be postponed. Medium to long term plans have been re-evaluated to meet the current needs of clients.  Wealth managers need to look through the cycle to manage what the uncertain future will look like. Clients expect tailor-made services suited to their individual needs whether its easily accessible financial management platforms or face-to-face meetings.

The adoption rate for digital wealth management solutions has increased dramatically during the pandemic. Standard Chartered launched a mobile fixed income platform in selected African markets at the beginning of 2020.  By July, up to 50% of fixed income transactions were completed using the mobile app. The diversification of digital product offerings in investments has given clients the option to choose where to invest based on market volatility during the COVID-19 situation. However, customers still care for an experienced professional who will translate and explain the strategies proposed by the systems, while offering support in the decision-making process.  The classic, relationship-driven business model with its communication channels such as telephone, email, and face-to-face meetings will not become obsolete, but there will be a shift from personal interaction to digitally enabled client interactions via intelligent solutions and social media. 

We are now moving toward a hybrid model of people and technology. Whilst there is a place for automated services, Standard Chartered Wealth Management believe that our customers still appreciate banking with a human element, offering the personal touch and creating strong relationships.  Clients can engage with their Relationship Managers and complete investment transactions at a time, place and channel where it is convenient for them.

Increased digital capabilities has given clients greater flexibility to choose where to invest. In June 2020 alone, product sales rose to an all-time high as a result of the increased accessibility through digital channels. The bank has seen a 65 percent digital adoption in online mutual funds throughout our African markets. Diversification of digital products offering can extend beyond helping clients to growth their wealth to also enabling clients to protect their wealth.  We saw a 94 percent digital adoption rate in general insurance throughout our African markets.

Through our SC Mobile App, we saw a 250% increase in wealth management transactions booked between March and April, when COVID-19 hit the African markets. Whilst Digital Transactions have increased during COVID-19 for Mobile Motor and Home Insurance. On a monthly average, the transactions were 160% higher in 2020 on the Mobile App in Kenya compare to 2019 monthly average sale.

Clients have grown increasingly interested in protecting their wealth.  In the UAE, our life insurance business had the highest demand for the last three years. During the crisis, and without the luxury of face-to-face meetings, Standard Chartered has conducted numerous webinars reaching over 17,500 clients in Africa and Middle East. The webinars were conducted by the Bank’s investment strategists, economists and investments specialists keeping clients abreast of market developments and investment strategies without the need to meet face to face.

Adapt to new business models

Based on current trends, over the next few years, the wealth management provider model will expand and refocus, with divides between people and machines fading. As client needs shift, services and interactions will evolve in multiple ways. For years, wealth management advice meant a client paired with a dedicated human advisor. More recently, as algorithms have become today’s trending topic, many have chosen the technology-only route, citing the lower cost and around the clock access it provides. However, for clients that have material assets to invest, neither alone constitutes the future of the wealth management industry. The COVID-19 pandemic has revealed the importance of pairing the human relationship with the support of technology.

It is becoming more apparent that firms that can provide an automated platform with periodic access to a human advisor rank as the most preferred scenario across a range of investor profiles, combining the best of both worlds for clients. In this age of information overload, Standard Chartered curates the most diverse market research and combine this with our own expertise to help clients navigate financial markets and make the most of investments. Through the bank’s digital channels, our customers have the ability to discuss investment and life insurance needs, review their portfolios and receive guidance on personal investment plans, execute investment and life insurance transactions, as well as updating or creating a Customer Investment Profile via the SC mobile app.

Conclusion

Wealth managers have been quick to adapt, making tough decisions like never before, yet clients should take more comfort in knowing they are supported by dynamic individuals and cutting-edge technology.

The need for different strategies around innovation in the wealth management industry was clear before the pandemic and people are now embracing the much-needed advancements.

There will always be a balancing act for wealth management between the importance of 24-7 access to information digitally, along with the role of human interaction which reinforces trust, especially during times when people have questions and doubts for the future. The biggest learning is that banks and wealth management have shown not only capabilities to adapt, but a willingness, which will only benefit the industry and clients for the long-term future. 

Article by:
Dr. Owen Young, Regional Head of Wealth Management, Europe, Middle East and Africa, Standard Chartered Bank

1 comment:

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