The budgets and expertise of the biggest providers mean that cloud-based solutions represent world-class cybersecurity, but are vendors doing enough to help wealth managers get this message across?
Wealth managers are catching up fast to their e-commerce cousins in seeking to fully leverage client data. And so they should be making the most of the wealth of information they have on HNWIs’ financial profiles, objectives, attitudes, lifestyles and interests. And I use that word advisedly: client data really is gold, not only for improving client satisfaction but for uncovering more opportunities to do business too.
Naturally, firms are also highly aware that client data is very much a “double-edged sword”, not least because of the dramatically tighter governance and security measures required under the General Data Protection Regulation and California Consumer Privacy Act. The prospect of fines for security breaches that could reach 4% of global revenues is certainly focusing minds.
A red button issue with clients
Cybersecurity is also very much a “red button” issue with clients today. They see high-profile data breaches regularly hitting the news and know that the wealth management sector is a particularly enticing target for cybercriminals. In fact, relationship managers tell us that clients and prospects are increasingly asking probing questions about the firm’s cybersecurity defences.
Relationship managers tell us that clients are increasingly asking probing questions about the firm’s cybersecurity defences
The industry can only move forward in its digital journey if clients have complete cybersecurity confidence. Despite the huge potential of mobile apps to boost client engagement and relationship outcomes, adoption in the wealth management sector is among the lowest of all industries – a lag which is largely attributed to security concerns.
Similarly, although 58% of HNWIs say they would even be willing to share social media information with their financial advisor to get more personalised service, only 52% are completely confident their financial institution will keep their details safe, highlighting a real trust gap. As I recently wrote, Bigtechs like Google and Amazon have engrained the habit of exchanging data for personalisation, but top-quality information security is very much seen as part of that deal.
Data due diligence
Data security should, therefore, lead the conversations tech vendors have with wealth managers, not only to satisfy institutions’ own due diligence processes but also to enable them to articulate the rationale behind technology choices to advisors and clients. Increased awareness means good answers to questions on data privacy, cybercrime and cloud issues must be forthcoming.
Happily, we encounter “ideological” pushback on cloud solutions less and less amid a growing appreciation of how unnecessary the expense and all-round hassle of on-premise deployments are. Yet we shouldn’t let the focus on efficiencies obscure the security benefits cloud-based solutions offer too.
Strength in numbers
Microsoft’s marketers were given a gift at the end of October when it emerged that its Azure platform had won a $10 billion cloud resources contract with the US Defense Department. I would argue that the technology vendors which build their solutions on Azure were too. What more powerful marketing message can there be than one of the most security-conscious organisations in the world entrusting its data to your cloud platform?
Azu invests some $1 billion a year in security, ploughing in resources that few wealth managers could ever match
Microsoft invests some $1 billion a year in security, ploughing in resources and expertise very few technology vendors, never mind wealth managers could ever hope to match. We really are, therefore “standing on the shoulders of giants” from a security point of view, as well as for sheer processing and storage power.
The message really is as simple as that. Wealth managers choose to outsource building their digital client suites to user experience experts because it makes more sense to access those capabilities elsewhere. Likewise, nimble technology vendors choose to operate in a cloud environment where world-class security is built-in, rather than constantly reinvent the security wheel themselves.