Digital transformation has transcended firms and has penetrated the entire supply chain. It has impacted and continues to transform businesses and financial ecosystems integrating customers, governments and even regulators. This transformation has meant that businesses’ relationship-driven business models needed to shift away from personal interaction towards a more digitized interaction with clients. As Strategyand puts it, ‘a high-touch, high-tech model’, is now more relevant.

Financial sector has been a front runner of this transformation with the wealth management industry as no exception. Within wealth management, digitization has given the benefit of stronger client relationships, reduced operating costs, and enhanced risk management and regulatory compliance capabilities.

Wealth management industry has popularly taken the form of digital platforms, social media, application programming interfaces, big data, robotic process automation, robo advisors, cognitive technology and blockchain technology.

In a post global financial crisis world with increased regulatory requirements, high net worth individuals’ (HNWIs) expectations have exceedingly become challenging for wealth managers. HNWIs, who are typically tech savvy, are now not just looking for returns but are also seeking service that offers diversity of investment sources, flexibility, transparency and regulatory compliance, all on a digital platform. Wealth management firms that have invested in digitization have been able to capitalize on its benefits first by strengthening investor relationships and responding to their evolving needs.

Additionally, increasing competition within the industry is putting pressure on margins. This is forcing wealth managers to find innovative solutions to investors’ investments needs at lower costs. Adoption of technology and use of digitization has been used to achieve the mix of lower costs and innovative services. Digitization can help standardise some aspects of its investor relationships. For instance, information on investments data can be accessed easily by investors, which are customer focused, incorporates various risk-return profiles and covers different what-if scenarios. Digitization of internal management systems can greatly reduce costs in terms of administrative time consumed to respond to investors’ requests.

Another element of cost reduction is the better use of relationship managers’ and specialists’ time. Investor interaction using videoconferences or online chats make contact quick and easy. Moreover, an automated client management interface can also track individual investments, highlight suitable trading situations or bring to attention any deviations of portfolio from pre-established risk profile. Such digitization can bring immense benefits to wealth managers by freeing up their time from manual work allowing them to cater to more investors and eventually bringing down some of the administrative costs.

Another important benefit of digital solutions has been the ability of wealth management firms to manage risk and compliance. By investing in systems with applications that incorporate risk and compliance checks, firms have been able to reduce compliance costs and minimize reputational risks.