Wealth managers needs to behave like tech firms

By Lachlan Maddock ·
July 20 2020

Wealth managers needs to behave like tech firms

Wealth managers will need to leverage data and analytics “in every aspect of their business” while adviser user ratings will soon be ubiquitous, according to McKinsey.

By 2030, wealth managers will be using data and analytics for both client and non-client facing aspects of their business, changing the type of talent they seek out.

“As data increasingly becomes the “raw material” for success, financial services providers need to behave and function like tech firms,” McKinsey said. “In recent years, banks have been competing with the likes of Google and Facebook for tech talent. The same will be true for wealth managers as they seek to meet customers’ digital demands, make data-driven, AI-enabled investment decisions, and improve operational effectiveness.”

McKinsey offered the example of Lufax, a Chinese wealth management platform that engages customers purely through a mobile app and leverages behavioural data to understand customers’ needs ad project their future investment paths, as well as using artificial intelligence to match investors to products.

McKinsey also projects that the democratisation of advice will lead to more advisers being rated and reviewed online in much the same way as “transparent, community-based ratings” are common in other industries.

“To date, an advisor’s reputation has been largely shaped by word of mouth; no systematic, transparent form of advisor ratings or reviews exists,” McKinsey said. “This is bound to change as the bar for customer experience is set by industries outside of financial services, information availability increases, and data-sharing continues to grow in relevance.”

That could lead to a decline in client “stickiness” as clients switch between advisers with different or better ratings, though the same trend could encourage better performance and in turn boost client retention.

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Lachlan Maddock

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Wealth managers needs to behave like tech firms