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Wealth Management & Private Banking

Rewiring wealth advice for Asia’s digital age

Bobby Bok

06 Oct 2016

A worker gestures as he stands on steel bars at a port in Qingdao, Shandong province, March 17, 2014. China produced an average of 2.097 million tonnes of steel a day in the first 10 days of March, up 0.72 percent compared to late February and the highest since mid-November, but output from big mills declined markedly, data from the steel association showed. Picture taken March 17, 2014. REUTERS/China Daily (CHINA - Tags: BUSINESS) CHINA OUT. NO COMMERCIAL OR EDITORIAL SALES IN CHINA - RTR3HNZP
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Meet the Rewired Investor, whose digital-first approach to advice is one of three generational and technological ‘game changers’ confronting Asia’s wealth management industry.

Investors in Asia-Pacific demand digital contact like nowhere else in the world.

That’s why more than 80% of them are expecting most, if not all, of their wealth management interactions to be on a digital platform within the next five years, according to the Capgemini report: Wealth Management in Digital Age, 2016.

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This means wealth managers must provide High Net Worth Individuals (HNWI) with real-time information and more engaging and interactive investment tools, while at the same time delivering highly personalized advice and service.

If they don’t, they risk losing business. In Asia-Pacific (excl. Japan), more than 50% of Wealth Managers said they would leave their wealth management firm if it lacked digital transactions capabilities, the Capgemini report adds.


Wealth managers now have a broad range of CASM (cloud computing, apps, social media & mobile) connections on their side to help them deliver their services in a faster, more interactive and bespoke fashion.

But it is clear that digitalization, alongside big data and advanced analytics, is now reshaping the industry in much the same way as happened in financial services.

On top of this, Asia is also experiencing a massive inter-generational wealth transfer, causing a marked shift in investor behavior and expectations.

Here, we present our views on the three key “game changers” facing the industry:

1. Aging Advisors and the Transfer of Wealth

Advisors are aging and leaving the industry faster than firms are replacing them.

Coupled with a marked shift in investor demographics due to the passing of wealth through the generations, this could mean a massive dislocation of existing advisor-client relationships in the next decade.

The age gap between advisors and the next-generation investor makes it challenging for some advisors to understand and adjust to the needs and preferences of the younger HNWI.

This results in weaker client-advisor relationships.

Many advisors have also been slow to adopt new tools, such as mobile channels, and evolve towards new advisory models that leverage on technology without losing the human touch.

Business people shelter from the rain under outside a luxury store in Tokyo, Japan, February 15, 2016. Japan's economy shrank more than expected in the final quarter of last year as consumer spending and exports slumped, adding to headaches for policymakers already wary of damage the financial market rout could inflict on a fragile recovery. REUTERS/Thomas Peter TPX IMAGES OF THE DAY - RTX26XU0
REUTERS/Thomas Peter

There is no simple resolution for this and many incumbent wealth management firms invest in training without realizing significant returns on their investments.

New technologies and robo-advisory capabilities can ease the shortage of advisors by allowing existing advisors to serve a greater number of clients. However, regulatory approval for these new techniques is a challenge.

2. The Rewired Investor

Generation X and Y investors think differently about advice and bring new attitudes and expectations to the wealth management industry, which also influences how older investors purchase and consume wealth services.

Here’s what you need to know about the Rewired Investor:

  • They want to stay in control of their financial lives and understand the advice they receive in order to make the important decisions themselves.
  • They are reluctant to buy discretionary services and they are increasingly comfortable conducting their own research. The Rewired Investor is more skeptical of authority than previous generations of investors.
  • They believe in the wisdom of their peers. As a result, they are likely to seek opinions and views from multiple sources simultaneously, including but not restricted to experts and financial advisors.
  • Their expectations are shaped by their interactions with non-financial digital firms such as Google, Facebook and LinkedIn, as well as smartphone apps.
  • They expect to access advice anytime, anywhere, anyway, through multiple channels and devices as part of a cohesive, digital-rich experience.

The Rewired Investor is here to stay and their influence over other investors will increase.

Accordingly, wealth management firms and their advisors must adjust their offerings and service delivery models to win the battle as wealth is transferred to the new generation.


3. Analytics and big data

Leading wealth management firms are investing in more advanced analytics and big data management capabilities that offer new ways to engage with clients and manage client relationships and risks.

While most wealth management firms already use fairly simple analytics based on management information and reporting systems, we expect firms to develop more descriptive and predictive analytics.

This new generation of analytics will combine internal and external, structured and unstructured data to create more complete and insightful client profiles.

This enhanced insight will allow firms to assess existing or potential clients’ propensities to purchase various products and services, their lifetime value, investment style and risk tolerance.

These three ‘game changers’ promise — or threaten — to upend the wealth management industry, depending on how prepared you are.

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