Who will win Wealth Management?

Amar Pandit , CFA , CFP

Amar Pandit

A respected entrepreneur with 25+ years of Experience, Amar Pandit is the Founder of several companies that are making a Happy difference in the lives of people. He is currently the Founder of Happyness Factory, a world-class online investment & goal-based financial planning platform through which he aims to help every Indian family save and invest wisely. He is very passionate about spreading financial literacy and is the author of 4 bestselling books (+ 2 more to release in 2020), 8 Sketch Books, Board Game and 700 + columns.

July 19, 2022 | 5 Minute Read

The recent Bain & Company Wealth Management Report projects a $90 trillion increase in assets from all investors globally by 2030. Bain also projects digital human hybrid firms winning wealth management growing the revenue pool to $500 Billion in 2030. Yes, you read it right – Digital Human Hybrid Firms will win wealth management. Isn’t this the core message you have been reading in many of the blog posts? Another interesting data point is that 45% of the $90 Trillion of assets will come from individuals with assets between $100,000 and $1 million.  While there are many interesting data points and insights (some of which I will cover in future posts) in the report, I will highlight and expand on some key points from the report in this post.

The report says that serving new customers effectively requires a delivery model that actively leverages digital tools and channels, with human interactions reserved for critical or complicated episodes. Tilting digital would allow companies to increase the ratio of clients per advisor to around 300. But not just any form of digital will do; most customers expect simple, convenient tools and user interfaces.

A key takeaway from the above is that not any digital will do (I also add that not any human will do either).

Another one is that the right digital will allow you to scale up your advisor capacity (from a client experience perspective) significantly (this has a direct impact on profitability, and thus valuations). Where exactly then do you use human professionals and where do you use technology? Getting this balance right is paramount. The winning digital human hybrid firms will get this equation as well as balance right.  I call this combination as True Digital.

In my book “The HappyRich Advisor“, I have explained this concept.

True Digital = Human Intelligence + Artificial Intelligence

happyrich-advisor-book

You have to realize that there are some things technology is good at and there are some things we are good at. The foolish ones try to compete with technology in areas where technology has an edge. A classic example is doing something faster and cheaper. Can it ever be done by people?

On the other hand, technology cannot emotionally connect and build a relationship with a real person who is looking out for insight and wisdom or hand holding in turbulent times. Remember you are not in the business of selling airline tickets, books, t-shirts and vegetables. Getting these nuances is critical.

There is an overwhelming choice of technology products and solutions today. Not any will do. Building (not actually building but choosing different technology products) an integrated technology stack is easier said than done. This is an area where you need to be super thoughtful and must seriously think of collaborating with people who have been in your shoes before.

Majority of the software vendors in this space have never run your business. While they understand technology, most do not understand the nuances of the domain and what it takes to build an outstanding client experience in the wealth management space. Rarely will you come across someone who does. Thus, most software providers obsess with more and more features instead of leaving out the non-essential rubbish. If vendors can’t get this right, imagine the plight of everyone else.

This is also the area where most firms and founders go wrong. The biggest wealth firms globally know this and thus they also rely on partners (with a deep understanding of technology, client experience and domain) for building a futuristic technology stack.

What about you? Are you relying on a partner to help you navigate this critical technology landscape?

Many of you will have this question “Where do I start?”

I say, “Start with Strategy.”

Yes, without an Amazing Strategy, any digital initiative can fail (rather will fail). Once you have got your Strategy right, then you should think about enabling your strategy digitally?

Like I have written before, Strategy is not just about what you will do but more importantly about what you will not do.

Thus, ask yourself these questions (the list is more comprehensive than these 6 but it’s a great starting point):

  1. Who is my Ideal Client and what does my Ideal Client need?
  2. How many Ideal Clients do I really need? How much time will I be spending with each Ideal Client? How many clients can I then effectively serve?
  3. What is my value proposition as well as service model and how will I deliver this seamlessly?
  4. How do I create a world class client experience and clearly stand out from competition? What technology investments are essential to achieve this feat?
  5. How do I acquire clients fast?
  6. How do I improve my client acquisition ratio (closure ratio)?

The Bain Report ends by saying that material wealth continues to spread around the world. New technologies allow individuals to be more competent investors and control more of their financial destiny. But there’s still an important role for wealth management firms. Those that develop the right blend of digital tools and human advice for the next generation of investors stand to reap substantial value for years to come.

If this is true (which I believe it is), what are you then doing about this?