The Covid-19 outbreak will reshape Asset and Wealth Management by turbo-charging existing trends
Even as the coronavirus situation takes a heavy toll in societies and economies, business must prepare for what's next. Commentators are noting the growing importance of the government and technology, but how would that play out?
Crises have a knack of accelerating trends by turbo-charging creative destruction. The 2000 DotCom took down boo.com to pave the way for Google and Facebook. The 2007 crisis cleaned out Lehmans, leading to the longest bull market in history.
The current crisis will likely follow the same path. Laggards will be weeded out as acceleration of existing trends makes it impossible to adapt. But what are these trends for Asset and Wealth management?
1. Digital overtakes physical interactions
Start with the obvious one.
The outbreak has brought digital meetings to the mainstream. Combined with cost controls and the inevitable psychological hangover, this is likely to morph into the new norm. We expect most Wealth Management interactions to become digital - including sales, on-boarding, advisory and catch-ups.
As a result Wealth platforms will be the entry point to the organisation. On-boarding paperwork, valuations, fund transfers, document exchange and e-signatures - they will be Must have features. If it's not in the portal, it's not in the service.
Digital channels can depersonalise interactions, so firms with a "personal service" focus will have to rethink the approach. Advisers and Portfolio Managers will have to lead the charge with messaging and video conferencing tools to maintain proximity with their clients.
2. ESG transparency will be key
Humans can find silver linings even in the direst of circumstances as seen in articles about the environmental recovery linked to reduced human activity. When the worst is over, fingers of blame are likely to point to unsustainable lifestyles and economies.
Investment brands are likely to see increasing demand for ESG investments, at a sustainability level that goes beyond green-washing. As ESG credentials and fees come under the microscope, transparency is likely to become a key differentiator for many firms.
3. Mass affluent market will become profitable
The wholesale move to digital will generate data - lots of data. Armed with that data and modern, Cloud-based software, firms will find themselves able to scale at a lower cost. As £50-500K portfolios will become profitable, there will be a rush to capture the hitherto neglected mass-affluent market.
In this race, the most digitally aggressive firms will have a profound competitive advantage. To service at scale, you don’t just plan to do more of the same things - you must do things differently. Going from personal to personalised will require firms to think data-first.
Conclusion: Business as (Un)usual
The world will settle into a New Normal soon enough, and Wealth Management will inexorably follow suit. As the race to adapt to a digital-first, ultra-transparent, scaled-up reality gathers speed, the most aggressive firms will have a tremendous competitive advantage.
In many ways nothing has changed - it's still all about data and software. But it’s happening a lot faster.