Wealth managers and private banks need to ‘democratise’ their service and product offerings to a wider audience to compete and grow in the new hyper-digital world according to a report by Avaloq.
If firms do not democratise their proposition, they risk losing market share according to findings comes from the report “Democratization of Wealth Management – a Unique Business Opportunity”.
According to the report, the wealth management sector faces deep structural margin and transformation pressures, rooted in a mix of rapidly changing client demands, tighter regulations and new, fiercer competition from a combination of fintechs, neo-banks and ‘big tech’ all trying to gain a foothold in the market.
For Avaloq, these challenges can be traced back to four megatrends: wealth shifts, socio-behavioural changes, technological evolution and economic & monetary turmoil.
“A new generation of tech-savvy, wealthy clients, with a high demand for seamless digital services, is behind the unstoppable nature of these megatrends. But rather than be an obstacle to growth, we see a significant opportunity for wealth managers that bring high-end wealth management services to the affluent segment. This democratisation requires wealth managers to deliver personalised advice at scale while addressing the specific needs of this new affluent clientele through a balance of industrialization, innovation and individualisation,”
says Martin Greweldinger, Group Chief Product Officer at Avaloq.
Avaloq warns that ‘plain-vanilla’ value propositions are no longer acceptable for a diverse clientele that ranges from an evolving, tech-savvy ultra high-net-worth individual segment to affluent high-earning millennials. Used to superior, digital-first experiences from ‘big techs’, these clients take bespoke, holistic, and impactful advice for granted.
To satisfy their demand for hyper-personalised services, traditional financial data needs to be combined with datapoints like client lifegoals. Conversational banking, portfolio modelling tools, behaviour-based risk assessments and virtual assistants have become the key tools needed to support such value propositions.
In its report, Avaloq lists a five-step agenda, balancing industrialisation, innovation and individualisation efforts to successfully democratise wealth management:
