Home > blog > Digitization will change Wealth Management: How will you keep pace?

The global wealth management market is expected to grow at a CAGR of 9% from 2021 to 2025. Wealth management firms are still recovering from the COVID-19 disruption.

Globally, Wealth Managers are looking for answers to a few pertinent questions:

  • How can you increase data accuracy levels through domain led data model?
  • How will Wealth Management firms balance employee safety and run a high-touch business?
  • What are the expected changes in customer behaviour? How will firms meet new needs?
  • What will be the nature of operational risk in this ‘new’ world?
  • Overall, how will digitization impact the wealth management business?

To seek answers, let us begin by examining a few dimensions.

  • Impact on the advisory business:The advisory business is poised to fundamentally change in the coming years. One of the key shifts is customers asking for personalized, data-driven advice. Wealth Management firms must consider the possibility of providing advisory as a subscription service. In doing so, customers expectations for a seamless personalized investment advisory can bear fruit.Next, advisory businesses will do well to shift to longer time horizons. As compared to shorter durations, this step will help customers achieve bite-sized investment goals. For example, a customer may want to invest certain corpus to generate returns enough to make down payment on a second home. For these types of requests, advisories should borrow from the success of fitness apps that enable users to achieve short-term goals by breaking down larger goals into more attainable steps.

    Thirdly, advisory firms will profit if they learn from the big technology companies that provide infrastructure and software. Many of such companies wield a significant footprint amongst a wealth manager’s clientele. Consequently, they hold significant customer behaviour data – a veritable gold mine.

  • Impact on the role of advisors:As Robo-advisory (digital platforms for communication and investment) gains favor, expect the role of an advisor to change.Also, in the decades ahead, the customer demographic is set for a significant churn, as millennials, women, and minorities start owning a larger chunk of wealth. As the landscape changes, so should the profile of wealth managers. Firms can prepare for this eventuality ahead of time.

    These ‘new’ wealth managers will have to bring a more integrated approach to their financial planning process. Beyond investments, they will have to broaden their expertise to include new-age financial products as customers seek assistance across health insurance, estate management etc.

  • Operational Risk:Wealth Management has traditionally been a ‘work-from-office’ business.The pandemic has changed this irrevocably. Today, it enables customers and wealth managers to connect remotely. This however brings in a new set of operational challenges. Apart from the investment risk, wealth managers must now focus on Business Continuity Planning (BCP), Cyber Risk and Reputational risks.

    A three stage set of normalization protocols is the need of the hour.

    The first order of business is to oversee both employees and customers safety. Even under these altered operating conditions, the focus undoubtedly must be on the consistent quality of service – one that enables customers to achieve their wealth goals.

    In the medium term, wealth managers must ensure the cultural change needed to sustain this new mode of operation is complemented by provisioning new policies and technology. This will include cybersecurity, and protection of customer data and the firm’s reputation.

    And, in the long run, firms must work with regulators to operationalise, standardise, and improve these controls.

  • Impact on customer behaviour:More than a few wealth management firms reported losing business during Pandemic citing lack of appropriate technology and tools. As the COVID drags longer than estimated, appetite for Robo-Advisory adoption has significantly increased. Historically, Wealth Management customers are the most risk averse (only a third of them prefer to invest in risky assets). Post Covid, it will not surprise if more customers seek less-risky assets.Also, younger clients are likely to move assets from existing wealth providers. This is because millennials are more receptive to digital platforms and also to new-age companies offering outcome-driven commission and fee plans. In the decade ahead, expect competition to heat up for the incumbents. They must make fundamental alterations to their business model to catch these customer-changing-demands.


To recap, the changing customer behaviour presents both – A challenge and an opportunity. To thrive in these momentous times, firms must invest more in Digital Transformation, Analytics, and be creative in reducing Operational risks.

Finally, Wealth Management Firms should draw inspiration from the words of Francis Bacon:

A wise man will make more opportunity than he finds!

Disclaimer – The original opinion piece has published on MEA Finance

Article by

Maveric Systems