Wealth management: Still room for the human touch?

Face-to-face communication has traditionally been the bedrock of the wealth and investment management industry. But is it still demanded by all clients in the 21^st century?

Apparently not, according to the recent International Customer Conference held in Amsterdam by Italian software company Objectway. Peter Schramme, the company’s chief business development officer, adds that firms in the industry are increasingly using analytics to understand their clients and client behavior. They are also beginning to make much greater use of social media to engage better with them.

Georgios Lekkas, Objectway’s chief product officer, reports that customer experience “is the new competitive battlefield” for companies in the wealth management industry. Rather than meet advisors face to face, many prefer to communicate via e-mail and video. Most recently, wearables such as the Apple watch have offered a further option and one that firms should make part of their client engagement, he recommended.

The new approach was confirmed by Martin Dijkman, investment product manager at Netherlands bank Rabobank, which has developed from an agricultural savings bank to become a global leader in food and agri financing. “Customers want to be able to be able to do everything online and the demand for investment advice is falling,” he reports. “Additionally, customers no longer trust financial service providers and want transparency.”

Rabobank responded to the increasing focus on smart investment late last year by adopting Objectway’s eXimius platform, which has become the single database and engine for all investment portfolio reporting to the bank’s clients, both on paper and through Rabobank’s various portals and apps.

For Italian investment bank Mediobanca, the response has been to roll out CheBanca! -promoted as “The Human Digital Bank” and described in more detail by Michele Tanzi, Objectway’s client solution director. Clients can access tailored online advice from a robo advisor in the same way as they have traditionally done from a dedicated advisor.

Originally launched as in 2008 as Mediobanca’s digital retail bank, Tanzi said the aim of CheBanca! is to provide “a disruptive automated hybrid advisory platform, to encourage both traditional customers to transfer money  from savings to investment and also to attract digitally-minded customers.” Last August, Mediobanca doubled its asset management portfolio when CheBanca! acquired Barclays’ Italian retail banking business.

Consolidation ahead

Speaking with GTNews, Lekkas made a comparison between the wealth and investment management sector and the pre-consolidation car industry, with inefficiencies common to both. He anticipates further merger and acquisition activity between wealth managers, but stresses that this has to be supported by IT if M&A deals are to prove successful. “Without IT support, they’re hard to manage and it’s also difficult to roll-out new services.”

Lekkas believes that digitalisation needs to introduce efficiencies across the full range of financial services, including simple tasks such as opening a new bank account in addition to wealth management. “The industry has to reach a much higher level of maturity that others, such as telecommunications, have already achieved.”

Upcoming regulation including Europe’s adoption of the revised Directive on Payment Services (PSD2) and, from January 2018, the revised Markets in Financial Instruments Directive (MiFID II) will also test the industry, although MiFID’s first phase in 2007 has already made “a huge impact” on the firms served by Objectway.

The technology used by wealth and investment management firms must therefore be “lighter and easier”; enabling adaptation if and when regulation changes and also ensuring that “the average customer can easily set up and configure the service”. The UK’s retail distribution review (RDR) is a further set of regulation squeezing profit margins “so suppliers such as Objectway will need to become even more efficient, like Facebook and Amazon, with lots of automation.”

These challenges might prove secondary to others likely to emerge as the 21^st century progresses. According to guest speaker Chris Skinner, an authoritative writer on fintech and blogger on thefinanser.com, wealth management is likely to have become irrelevant within the next 100 years. In the meantime, he is optimistic that Africa’s potential to become affluent will finally be realized as the growing use of mobile wallets spur s trade.

“In addition, the first person to live to the age of 150 has already been borne,” Skinner predicts. “How does the wealth management industry cope with that?”

Tackling the US

GTNews also met with Luigi Marciano, Objectway’s founder and chief executive officer (CEO), who outlined the changes that digitalisation was bringing to the industry. These include the important process for firms of onboarding new clients; traditionally carried out face-to-face but now increasingly completed digitally.

The company itself, which has steadily expanded its presence in Europe, the Middle East and Africa (EMEA), South Africa and Canada, hopes to establish itself in the US within the next few years via a strategic acquisition. Marciano is undeterred by the prospect of the country adopting a more protectionist stance under the next administration, which he notes is focused on manufacturing rather than financial services.

Over all markets, the next 10 years offers strong opportunities for growth, particularly if average lifespans continue to increase. Objectway aims to continue to expand via a combination of organic growth and acquisitions of mid-sized companies with annual revenues of between €5m and €50m. “Acquisition provides the opportunity to meet new clients, find out what their problems are and discover how we can create value through new solutions,” Marciano adds.

And has Brexit made any difference to these plans. “The main impact on us so far has been in exchange rate volatility, although we’ve seen no slowdown in investment in the UK,” he reports. However, should the outcome of Brexit see a diminution of London’s status as Europe’s most important financial centre, he suggests that Dublin could be the main beneficiary.

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