Digitization is drastically changing wealth management. It is creating opportunities that were not possible just a few years ago. At the forefront of this is “hyper-personalization”.

Just as retail marketing has made leaps by leveraging advancements in digital content and data analysis techniques, hyper-personalization is the next value-add step in communication with wealth clients. Hyper-personalization promises to deliver higher client satisfaction at lower cost.

The State of the Industry

The threat to wealth managers who resist digital cannot be overstated, because clients increasingly expect more from their wealth managers, even while revenues evaporate. In addition, wealth management is in general behind the curve in digitizing. Wealth managers must evolve to survive.

High-net-worth individuals (HNWIs) are generally underwhelmed by their wealth managers’ digital offerings – including advisors’ ability to leverage their data to deliver better advice. Around two-thirds of clients would not recommend their current wealth manager and feel data is not being used to tailor advice.¹

HNWIs are digitally savvy. They already use digital financial service channels heavily – 69% use online and/or mobile banking and 40% use investment portfolio reviews. Some 47%, a surprisingly high proportion, would consider using a robo-advisor in future – although only 14% of HNWIs use robos today.² These trends are even more pronounced among younger HNWIs and those in Asia. All this evidence points to growing digital expectations among HNWIs.³

Yet wealth managers tend to be digitally immature and underestimate its importance.⁴ Many advisors insist that digital engagement is not crucial for the business of wealth management, and that HNWI clients do not want digital tools.⁵ It is therefore no surprise that three-quarters of wealth managers offer no digital communication beyond phone and email.⁶

It is not getting any cheaper to serve clients in the traditional manner. Fee models are being compressed massively, meaning margins are going down. The decline in commission fees is well known, but this is also being seen with fee-based financial advice.⁷ While gross and net margins are still quite good among fee-based advisors, this is not sustainable – especially as traditional advisors are increasingly compared with robos – and will eventually lead to unprofitable operations.⁸

The Four Pillars of Digitization

Digitization is the answer to an increasingly tech-savvy clientele and a contracting fee base. But what does that mean in practice? There are four leading-practice pillars that reliably define and enable digitization:

• holistic data integration
• open-architecture digital warehousing
• flexible data visualization
• hyper-personalization.

Holistic data integration means consolidating information from internal systems, private data sources and third-party financial institutions to create a comprehensive financial view. This is “real” aggregation. Most companies leverage “screen-scraping” and “HTTP-Post” technology to capture data. The result is incomplete, unreliable, limited-availability data. By contrast, taking a holistic approach to integrating data means directly accessing a financial institution’s data through both application programming interfaces (APIs) and open financial exchange (OFX) technologies – the most reliable and trusted formats in the industry.

An open-architecture digital warehouse enables advisors to track and report on an evolving universe of financial instruments and vehicles managed by a diverse stable of money managers. It uses tailored and affordable technology solutions to handle large and complex data sets. It frees firms from being tied to a single accounting system, custodian or money manager, and instead provides reliable safekeeping of all integrated data sources.

Open-architecture digital warehousing also means managing both structured (trades, holdings) and unstructured data (videos, PDFs, social media). It manages the time dimension of data to support real-time business analysis as well as robust historical data review.

Holistic data integration and open-architecture digital warehousing collectively comprise what InvestCloud calls digital aggregation.

Flexible data visualization means harnessing the power of digitally aggregated data to support thousands of views of this powerful and rich data set. HNWIs increasingly expect the ability to customize their views and then store and recall those views, for everything from simply adding or subtracting data columns to detaching views into separate apps. This also includes allowing users to assemble personalized dashboards. The more freedom clients have over their digital experience, the lower the cost to serve them, and the happier they are.

These first three pillars are crucial to support digitization. But what clients experience is based on the degree of empathy their advisors offer them. This comes in the form of hyper-personalization. There are two elements that comprise hyper-personalization in the digital wealth context:

• making the digital experience warm and personable;
• respecting clients’ individuality.

It may seem counter-intuitive, but a digital experience can indeed be human. Artificial intelligence fantasies aside, leaders in digital wealth like JPMorgan Chase Asset Management CEO Mary Erdoes are increasingly advocating a hybrid solution. Ms. Erdoes was quoted in the Financial Times as saying, “Human beings need human beings to explain the world to them”, but also confirmed that their digital wealth offering will cover all wealth management segments they serve – even up to the “ultra” tier of the HNWI segment.⁹

At the end of the day, it’s about delivering the best digital experience possible to empower investing while at the same time having human expertise available when it’s needed. That may be for episodic meetings (e.g. to review portfolio construction) or to deliver special services (e.g. trust setup). But advisors are not needed to deliver reports to HNWIs – this can and should be automated.

We are living in an ironic time, during which advisors often critique the digital experience because it is insufficiently personal, while in the same fell swoop delivering reports that are “one size fits all” to their HNWI clients. If you ask any advisor whether his or her clients are all the same, the response will be a resounding “no”. So clients should not be treated as if they are all the same.

With the right technology enabler, the digital experience can and should be highly personalized: intuitive, involved and individual.

Intuitive design means the person knows how to use the portal and its tools instinctively – no manual required. Simple, straightforward, honest designs force concentration on the essential aspects of the data presented.

Involved portals engage clients digitally – such as curated content, news and chat – which enhances the value of the portal to clients and therefore the frequency of using the portal. The client portal should become part of clients’ regular daily routines.

Individual means tailoring persona-driven digital experiences to clients so that the portal and apps “speak” directly to clients’ needs and wants.

While wealth managers know that each client is unique, their experiences are currently all the same. Digital provides the opportunity to differentiate each client experience and therefore appeals to modern HNWIs. Even for those who still value the human touch, a digital experience is still a complement. For many HNWIs, human advisors will continue to be a very important part of the equation, with hyper-personalization as the glue or unique selling point for the advisor.

Technologically, there are many opportunities available for wealth managers to unleash clients’ data potential.

Harnessing Hyper-Personalization

Digitization is easy with the right partner and approach. It is crucial to identify and develop personas within the HNWI client base (i.e. gauging how digitally savvy clients are, as well as how “high touch” they are). These personas should be matched to groups of users to ensure maximum respect of individuality.

The digital experiences need to be matched to these personas. The result is large-scale personalization at low cost. Examples of this technology at work include:

• Dynamic client portals representing distinct branding, apps and functionality based on user groups.
• HNWI client reports customized by user group informational needs and wealth manager “service level” (e.g. gold, platinum, etc.).
• Flexible reporting canvases, allowing advisors and even HNWI clients to create and publish custom reports on the fly.
• Tailored mobile apps to HNWI demographic – even more than one per wealth manager.

Truly Personal Service

When hyper-personalization is deployed, wealth managers can truly modernize their operations, becoming forward-thinking service providers who can demonstrate that they understand the individuality and needs of their HNWI clients. This promotes massive loyalty and satisfaction. Human interactions are still a part of this, reserved for when they are needed. This enables businesses to increase the number of clients serviced per advisor, driving down unit and total costs.

HNWI clients are not the same, and their requirements have changed. The wealth management industry is beginning to recognize this, but still has a way to go. Traditional standards of care in wealth management will always be important, but they are expensive to deliver and HNWI clients today want more. A traditional service model must be married to the digital experience, using hyper-personalization, if the industry is to truly address clients’ needs and survive as a business model.

Digitization is drastically changing wealth management. It’s creating opportunities that were not possible just a few years ago. At the forefront of this is “hyper-personalization”.

Just as retail marketing has made leaps by leveraging advancements in digital content and data analysis techniques, hyper-personalization is the next value-add step in communication with wealth clients. Hyper-personalization promises to deliver higher client satisfaction at lower cost.