New ecosystems in wealth management and how clients will benefit

Dr. Marcel Tschanz Partner Advisory, PwC Switzerland 12 Nov 2018

Wealth management is lagging far behind other industries in terms of digitisation and client-centricity. Just as ridesharing companies all but conquered the taxi industry, and online retailers virtually replaced book stores, wealth management is inevitably due for a reshape. It’s time to come to terms with tomorrow’s reality..

The looming paradigm shift

Wealth management is hurtling towards a moment of paradigm shift. Changing client behaviour, advancing technology, new competitors, shifting demographics and falling profit margins are combining to pressurise both the traditional universal banks and the boutique banks. Taken together, these factors mean that the industry cannot stay as it is. If it does not evolve, it runs the risk of losing existing clients and not gaining new ones. In addition, there is a growing potential for disruption by FinTechs or the tech giants, both of which are studying opportunities in a sector that remains a technology laggard.

A vision of the future

Our vision is that these pressures will lead to a platform-driven wealth manage-ment ecosystem, with several hyper-specialised providers. They will serve clients through digital platforms – the Airbnbs and Ubers of the wealth management world if you like. Digital interaction, backed by artificial intelligence (AI), will become the norm for some clients and fee structures will have to be amended accordingly. Consequently, we see two overarching client segments challenge the assets under management (AuM)-based categories: Local Affluents and Global Actives. Incumbent banks have a one-off opportunity to transform themselves into these platforms, securing a place at the core of wealth management. Alternatively, they might act as niche service providers on others’ platforms – part of a new ecosystem.

Gains for clients

Clients will benefit significantly from this future ecosystem, as their needs will become the industry’s priority. Service providers will become more specialised and, consequently, offer better knowledge of suitable investments, favourable lending solutions and how to navigate specific logistical challenges. Greater digitisation through use of AI will also simplify and improve services. And clients with complex international affairs will gain from a consolidation of all their complex activities into one, simplified overview on the digital platform. Overall, clients will benefit from a better range of products and services.

Obstacles to evolution

Naturally, such extensive change will not come without its challenges. There is the difficulty of regulations and tax laws differing from one country to another, the question of who takes responsibility for integrating the different service providers’ offerings, the danger that platforms favour related service providers and the problem of individuals failing to comprehend and self-assess their risk appetites correctly. Finally, it will be hard to win clients’ trust in a platform so powerful that it can access all their financial assets at once.

Time to change

Banks and wealth management firms have a simple choice. They can stay as they are and see profitability continue to fall. Or they can capitalise on rising demand for wealth management by becoming innovators – either as platform businesses or as specialists on other platforms. Regardless, action is required; the end of universal banking is near, and incumbents should prepare to transform themselves. While the need to prepare for tomorrow is urgent, the journey towards it can and will be gradual. We realise that implementing new business and operating models overnight is unrealistic. But firms should acknowledge the shape of the future, design a strategy, set out a timeline and plan the steps toward organisational change.

Summary

Imagine a world where wealth management services are accessible at your clients’ fingertips at any given moment; as integrated into daily life as social media apps. Where, instead of meeting with your relationship managers a few times a year, you can message them digitally at any time, view your financial situation in real time, and make adjustments whenever you like. Where, instead of being confined by the offerings of your bank, you choose your own bundle of individualised services from a variety of providers, onboard with new services instantaneously, and have all of them consolidated in one place.

You won’t have to imagine much longer; the wealth management industry has set a radical course towards making just such a digital world reality.

 

Contact us

Dr. Marcel Tschanz
Partner Advisory, PwC Switzerland
Tel: +41 58 792 20 87
Email

Christian Schmitt
Partner, PwC Switzerland
Tel: +41 79 833 5140
Email

Dr. Sebastian Hersberger
Advisory Manager, PwC Switzerland
Tel: +41 58 792 19 42
Email