Traditional financial advice is no longer enough

Technology is changing what customers want.
Wealth managers should use a data-driven approach to serve their clients better. Customers also expect more interaction. Picture: Shutterstock

When financial advisors and wealth managers in South Africa talk about using technology, they are usually focused on achieving one of two things – cutting costs or finding more efficient ways of meeting regulatory requirements.

Their intention is to use the technology to help them to improve whatever it is that they are already doing. Few take the logical next step, which is to consider whether technology can, and possibly will, fundamentally change the way that they should be operating.

Peter Schramme, the chief business development officer at fintech provider Objectway, says that wealth managers have to consider how the digital world is changing their environment.

“All the major disruption in this industry is driven by digital technology,” Schramme says. “It is absolutely changing our market, and it is absolutely changing the way we do business.”

He says that traditional businesses cannot ignore how new fintech challengers are changing customer expectations.

“They are raising the bar regarding customer experience and customer sanctification,” says Schramme. “That means that you have to adapt. They are driving the market to a higher level of customer satisfaction.”

Technology is the product

Essentially customers now have different expectations because they themselves are living in a different world. Financial advisors and wealth managers who don’t become part of that world may find it difficult to stay relevant.

“Technology is increasingly becoming the product,” says Thomas Zink, associate research director at IDC. “We need to re-think how we structure services and deliver them to the customer so that it delivers value. Just delivering an investment product is not what they want. They want outcomes.”

Zink points out that more people are now searching for financial and investment information on digital platforms. Where in the past they may have sought advice from friends or family, they are increasingly turning to Google.

A recent study by McKinsey also found that customers who have digital tools provided to them are five to 10 times happier than customers just interact with their traditional wealth manager. In other words, people want a digital experience when managing their money and receiving planning advice.

“The next generation of high-net-worth individuals are thinking quite differently when engaging with wealth managers,” said Zink. “Platforms like peer communities and social media are becoming increasingly important for them.”

More people around the world are consuming the majority of their news through social media, and this tends to be from a small number of sources.

“With this narrow view that a lot of people have nowadays, it’s becoming increasingly difficult for wealth managers and financial institutions to become part of the conversation,” said Zink. “A lot of investment is going into customer platforms where wealth managers can be a part of, or even moderate discussions.”

Improved interaction

Similarly, clients want to communicate with their advisors in different ways.

“Client wants to communicate quickly, but if they need to use the website, or an app it can be a complex task if it’s a multi-step process,” says Georgios Lekkas, Objectway’s chief product officer.

In order to be more accessible, many companies are turning to chatbots to facilitate basic tasks like supplying account balances or making simple transactions. These bots can be accessed through messaging apps like Whatsapp.

This is just one of the ways in which client interaction can be massively improved.

“Life planning is a very complex issue,” says Lekkas. “There is lots of data to gather and sustaining client engagement is difficult.”

Because it is complex, clients are also easily disengaged. Wealth managers are therefore not just introducing platforms that consolidate information, and make it easier to understand, but also looking at ways to change the way the client experiences that information.

“They are adding a bit of gamification, so clients receive gratification messages, telling them ‘Well done’ if they complete a stage in the process or reach a goal,” says Lekkas. “They could have visual cues to show you what stage they are in, and also have a next best action component, because at any moment in time there are many things to do. So what should they do next that is most likely to produce a successful outcome?”

Mass customisation

These platforms can also allow more regular interaction with the client, even if it is automated. This allows for better collection of data.

More sophisticated artificial intelligence systems could also gather data on clients in other ways, such as from social media platforms. These tools could pick up significant life changes and alert the wealth manager, creating the possibility for them to be more proactive, and not just reactive.

“Organisations own so much information about their clients,” says Schramme. “They need to use it to frame the client better, to be able to serve the client better. Data-driven client interaction is becoming fundamental.”

The ultimate goal is mass customisation – creating personalised service, but on a large scale. This is a goal that only technology can deliver.

“In a relationship-driven business, the ultimate sweet spot is when you are able to provide a very tailored, personal service in a very factory-style operational fashion,” Schramme says. “Technology enables you to do this – to create a factory-style service for an audience of one.”

Patrick Cairns is attending the Objectway OWIN18 conference in Rome. His travel and accommodation were covered by Objectway.



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I my discussions with a FA the typical services they provide whould enclude a monthly statement of my portfolio plus yearly cash flow analysis. I pointed out that I do these things myself with tools available and that it could be done on a daily basis if required. Their quarterly newsletter consisted mostly of articles copied from AllanGray and Coronation. The only value added item was to watch irrational investor behaviour. That could compensate for irrational FA behaviour. I suspect much of this comes from dealing with a previous generation of people without internet. Yes “a very tailored, personal service in a factory-style operational fashion for an audience of one” sounds like fun.

Financial institutions such a Momentum allow financial advisers to switch funds for free, but insist on a R250 fee per switch if the customer wants to handle it himself. I have complained about this several times, but to no avail. Why is this facility not offered on their site? It is my money after all and I am paying an admin fee. I do not have a financial adviser at the moment.
Although their staff is very polite, they get things wrong even though you put it on email. It took my then adviser eight emails in December plus a number of phone calls to do a simple switch. There have been other frustrating incidents.
Momentum needs to move with the times instead of irritating their customers.

End of comments.



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