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Turns out investors do want robo-advice … and the personal touch too

Wealth management calls for a best-of-both communications model.

JOHANNESBURG – It’s a question global chief executives in the wealth management industry are grappling with: How do I foster a lasting relationship with clients in an environment where engagement is moving more and more online?

While there is no ready-made solution to this dilemma, Peter Schramme, chief business development officer of Objectway, says managing this process is really about actively engaging with the client and providing tools to better service investors in a digital ecosystem.

Essentially, it entails the creation of a “sticky” digital environment where the client can interact with the wealth manager – and the wealth management firm – in a manner they are comfortable with, he adds.

Although financial institutions used to dictate how relationships with clients were managed, this situation is rapidly changing. Firms have to provide a platform for the client to interact with them in a way that suits their needs. The goal is a personalised experience.

Creating loyalty among clients in a digital world is essentially about mass-customisation, Schramme says. How can you provide a truly tailored, truly personalised service in a factory-style operational-excellence fashion? Digitalisation provides the wealth management firm the means to “provide a service for an audience of one”, which ultimately is what mass-customisation is all about.

But while investors are embracing the benefits of online tools, wealth management firms seem to underestimate clients’ appetite for robo-advice.

A 2015 Capgemini study shows that while almost 50% of global high net worth individuals would consider having a portion of their wealth managed by an automated advisory service, only 20% of wealth managers thought their clients would do so.

Schramme says this “perception gap” is largely due to the fact that investors are normal consumers and the trends shaping the consumer market – changes in buying dynamics, e-commerce and digital engagement – are also entering the wealth and investment management space. Investors are much more attuned to these developments than advisors think.

While organisations may argue that digital business still only represents a small portion of the wealth management market, a 2016 McKinsey study, The four pillars of distinctive customer journeys, showed that banks and financial institutions with digital-first business models generated higher customer satisfaction scores.

Schramme says this suggests that digital-first firms are changing the norm for existing traditional businesses by pushing the goalposts of customer experience and customer satisfaction.

“If organisations – established organisations – are not changing, are not adapting to these trends and to this kind of digitisation wave that is rolling over the industry, they are missing the boat, not only regarding customer demand, but also regarding customer satisfaction.”

Although wealth management firms are likely to increasingly include online tools as part of their offering, Schramme does not foresee robo-advisor-type models completely replacing traditional face-to-face interaction.

For transactional and administrative investment tasks, clients generally prefer to access their accounts online, but once they need to make a strategic investment decision, they still want to speak to someone with subject matter expertise. The same client may sometimes prefer an online engagement while choosing a face-to-face discussion in a different context.

For this reason, says Schramme, wealth management firms will increasingly approach clients according to their preferred way of interacting, thereby adopting a hybrid advisory model.

A hybrid reality – where investors can switch seamlessly between the two, and even between face-to-face and online interaction within the same process, depending on their immediate needs – is definitely the future “sweet spot”, he adds.

A 2016 report by Objectway and the European Financial Management Association (Efma), Digital Engagement & Collaboration in Wealth and Investment Management, suggests that the lion’s share of future interactions between financial institutions and their clients will probably involve hybrid engagements.

Online engagement can take several forms, including video, co-browsing (where the advisor takes over the client’s computer screen remotely to show what they are talking about) and personalised communication channels.

The report also shows that while many firms are thinking about how to position themselves in offering online investment management services, not many are yet providing tools and services for this purpose.

Schramme says that although wealth management claims to be a relationship-driven business, the ability to ‘understand’ the end client through social media and data analytics is much more entrenched in the consumer market and retail banking space.

This may in part be related to the strict regulations applicable to wealth management, which require a lot of attention. Moreover, the legacy systems prevalent in this sector are typically not fit for purpose when it comes to providing a personal, digital offering to the end-investor. Investment firms will probably need to make significant investments to embrace this trend.

Schramme says while certain challenges slow down the adoption of online investment management services, it is clear that nearly all players in this market are actively looking at how digitisation can help their businesses.

“It is also quite important that it is not seen as a replacement of the current traditional business but as a complementary offering – a complementary service – next to the traditional ways of doing business.”

While the traditional model of investment management services was focused on capital preservation and capital growth, digital technology now enables organisations to efficiently and effectively offer goal-based investments, where clients define their life goals, assign part of their assets to these goals and then make sure that they reach these goals over a certain timeframe.

Schramme says as a result of digitisation, “self-service” has increasingly entered the wealth management space and has allowed firms to actively engage clients while also pushing a certain administrative burden from the organisation onto the shoulders of the end client. Higher self-service adoption levels are expected while digitisation further develops in this market.

* This content was brought to you by Objectway.


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Here comes the future and there goes exorbitant commissions.

Yeah it will definitely weed out and cull the dodgy advisers, which is desperately needed. I am sure the good, honest wealth managers will still be around because those are the ones who don’t extort exorbitant commissions from their clients. The companies and “Advisers” who only see clients as “targets” or ‘Numbers” will disappear virtually overnight.

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ZAR / Euro



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