A new report suggests that wealth management firms may need to move beyond interpreting existing operating models of expanding and retaining business in the digital age.

Wealth management firms have been slow to introduce
technologies that address mounting industry regulatory, privacy and cultural demands, but there are numerous opportunities to be had from exploiting shifting demographics, changing client expectations and technology, PricewaterhouseCoopers says in a report.

The study is called The Connected Advisor: The Rise of Digital
and Social Advice In Wealth Management.

“Efforts may need to move
beyond interpreting existing operating models of growing, retaining and executing
their business digitally,” it says. “Indeed, social and digital technologies
are already a part of leading practices in wealth management.”

The findings echo a
report in May which claimed that while wealth management firms have improved
the most among luxury brand industries in building personal connections with
clients, they are missing out on “brand love” and loyalty by not exploiting the
benefits of digital technology.

Digital communication is “changing the game,” said Kevin Crowe, head of
solutions at SEI Advisor Network. “It is vital for financial advisors to
connect with clients and prospects through both digital and traditional mediums
in order to become a more influential and valued provider.” View the full
article here.

Many wealth managers have established
policies and invested in technologies that integrate regulatory requirements, such
as archiving and compliance, in a bid to expand their social media presence. Marketing capabilities are consequently
getting more sophisticated, with individual advisors and advisor teams establishing
a unique digital brand. This has, the report says, made the geographic location of a firm less relevant, giving rise to client acquisition prospects in new regions.  

Meanwhile, new technologies
are also giving rise to what PwC describes as “social intelligence gathering” -
a key tool in capturing client insights and making interaction more meaningful.

At present, many firms are
gearing efforts toward strengthening advisor adoption of social channels and
engagement, but next will be “social listening.” This involves understanding what
prospects and clients are saying about the wealth manager and the industry
issues they face.

“This real-time social data,
when coupled with data from other systems within the organization […] and
external data available today, can create a holistic view of clients, their personal
and family networks and all their wealth managers and advisors,” PwC says.

“Social collaboration”

The report suggests that the main advantages of
so-called “social collaboration” are evident when integrated into the daily
activities across the organization.

“Whether in proprietary
online communities, groups for next generation education, or interest groups,
the promise is to place the advisor with the client digitally,” it says. 

The challenge is thus to “create
the right incentives” by effectively managing and enhancing these communities. The
result of investing in this capability amount to five times the cost of the
initial technology, the firm said, citing previous studies.

The report concludes that, in
the age of automated investment advice, non-investment services have only grown
in importance; PwC says its research indicates
that two-thirds of these services will likely be based on partnerships with
third-party providers in the future, as firms continue to grapple with operational costs.

“Given this need to collaborate outside of firm walls, the question is no longer how firms must structure
workflows and their role in the value chain to gain competitive advantage,” it recommends.

“The opportunities lie in
breaking down walls to bring previously disparate groups together using
technology. Much in the way crowdsourcing has transformed how technology is developed,
we see the co-creative development transforming the voice of the customer
– whether client, advisor, employee or partner – in wealth management.”

PwC said it has observed that
“with disruptive technologies come new entrants,” adding that current players
are generally less likely to be early adopters or exploiters of such
advancements.

It warns that the legacy
systems and client engagement models used by many traditional wealth managers may
eventually put them at a competitive disadvantage.

“Success will likely be
promoted by addressing changing customer needs and behaviors, communicating
with key stakeholders, fostering a culture of knowledge sharing and rewarding behaviors
that support overall business strategy and desired digital outcomes.”