• Jo Howes , Commercial Director at CREALOGIX UK


• 15.11.2018 10:45 am
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‘Old fashioned,’ ‘elitist,’ ‘obscure.’ These are some of the impressions that young consumers have of the wealth management industry today. Long in need of a digital face-lift, wealth management is coming under increasing pressure to adapt to changing demographics and consumer expectations. A decrease in trust in traditional financial services and a preference for a more goal-orientated experience is providing ample opportunity for new challenger brands to disrupt the market, and for the incumbent firms to ramp up their drive for innovation.

The most significant response to these shifting consumer trends has been the emergence of app-based services. These address the need for a more interactive and personal user experience, catering to the preference of consumers looking to engage with their investments via a digital channel.

With a digital platform, brands are able to meet these demands and attract new customers. A prime example of a popular feature is “robo-advisory” services.

The emergence of automated advisory services in the field of wealth management is a growing trend in the industry, with some predicting that robo-advisory services will be managing some $1 trillion in total assets by 2020. This phenomenon, which is now shaking up the financial sector, started with a regulatory push to keep investment management separate from personal financial advice. 

Robo-advisory services are fundamentally about offering an investment portfolio that is more self-managed, rather than being advised by a relationship manager alone. Users of the digital platforms input their personal investment parameters, such as their goals, personal circumstances, and risk propensities, from which complex algorithms can make recommendations from a selection of predefined investment strategies. 

In this guided digital experience, investors are able to manage their portfolio independently of human advisors and manual intervention, if they choose saving significant costs for the wealth management company. Without the overhead associated with intimately involved wealth management professionals, many brands can offer these services with minimum investment requirements of as little as £1, effectivelyupending the paradigm of all wealth management being for high net worth individuals. This means users can still benefit from the expertise of a wealth management firm regardless of their level of investment .

High levels of personalisation and accessibility open up fresh possibilities both for long term retention of existing customers and for appealing to entire new classes of investors, empowering users with self-service capabilities at any time with no need for human intervention.

Robo-Advisory: appealing to the mass market

This is exactly the type of technological innovation the wealth management industry needs in order to remain relevant in a world undergoing digitalisation, and to shake negative public perception. Wealth management firms are well aware of the problem of an ageing clientele, and the availability of this technology should be seen as an opportunity to not only address the mass market with digital offerings, but to also cater to the demand of young, wealthy clients who are increasingly demanding a high-quality digital platform. 

The shift in consumer attitudes is quite a phenomenon. A recent study, commissioned by CREALOGIX, revealed that almost 20% of people view traditional wealth managers as “elitist” and “old fashioned”, and more people would turn to family or a partner before seeking out a wealth manager with £100,000 to invest.

The same study showed that overall, less than 20% of consumers consider wealth management providers for large investments at all. 41% of Millennials turn to family for investment advice over banks and professional wealth management services, and that number rises to 56% of Generation Z. 

By the end of the decade millennials will bethe largest demographic group. If wealth management services do not make efforts to bridge the generational gap and appeal to the younger generations, they will be sure to miss out on a lucrative market opportunity.

Changing the face of the industry

Digital and robo-offerings have sparked a new area of competition. Through reducing the need for human intervention, robo-advisory services can provide an experience that is accessible, intuitive and empowering, democratising access to professional wealth management. 

In addition to a vastly increased accessible customer base, the whole offering becomes more scalable. Uniquely in the history of the industry, it provides the capability for expansion at the level of thousands of customers a month, without compromising the quality or profitability of the service. 

To reclaim the competitive edge from the disruptive challenger brands, leading incumbent firms can readily adopt the same technology, while retaining their traditional face-to-face offerings, to keep their existing high net worth clients as well as winning new market share.

Traditional firms have the advantage over purely digital platforms in that they can provide a combination of digital hybrid offerings with an already established face-to-face service. This caters to a broader audience,while circumventing the risk of interpreting “digital first” as “digital only”.

There are no barriers to digital 

There is no longer a barrier from a technology point of view. Specialists like CREALOGIX have sophisticated solutions ready for financial institutions to bring to market rapidly, even in complex environments. 

The challenge now is for forward thinking wealth management institutions to recognise the opportunity available to them, and the cost of missing out. The rapidly building competition from digital challengers combined with the commercial opportunity in being an early adopter in the robo-advisory market means this is the time the begin embracing the technology as a cornerstone of a digital wealth management strategy.