New Report Examines The Next Phase Of Social And Digital Advice In Wealth Management

Eliane Chavagnon

13 September 2013

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.”