In my series so far, I have explored the digital hybrid advice and the underlying data requirements that are driving strategies for Wealth Managers as they look to the future.

In this third and final article of this series, I will explore the democratization of products and services by Wealth Managers.

Democratisation of Products 

The improvements in technology have also enabled what has been coined the democratisation of Wealth products, which historically, have only been available top end HNW and UHNW clients.  This is evident on several fronts - the lowering of entry thresholds to private markets, the creation of digital assets and the increase in Digital Advisory journeys (robo).  Both trends are in their infancy, but the disruptive journey has certainly commenced.

• Lowering entry thresholds to private markets.  Historically, minimum investments have been in excess of $1m to invest in Private Equity, but this has now been reduced significantly, and could be lowered even more.  Some of the underlying reasons are not just aligned to technological advances.  Wealth Managers / Private Banks can offer an omnibus model, pooling investments across their clients to meet the minimum investment amounts, but this requires significant overhead in the operating model to be able to manage remittances and early exits where individual clients want to change their investment strategy.  That said, the biggest disruptor remains technology, with the likes of iCapital, Yieldstreet, Moonfare and others providing Private Equity platforms that automate the omnibus approach for wealth managers and their clients.  Furthermore, this is putting pressure on the PE funds themselves to invest in better technology capabilities.  This latter scenario is a strong use case for tokenised digital assets - translating the contractual obligations of PE investments into coded rules within a DLP smart contract not only reduces the operating costs for primary PE but opens up much greater opportunities in the secondary PE market.
• The advent of Digital Assets.  Much focus has been on cryptocurrencies and their value as an asset class in investment strategy, but perhaps, the focus should be more on the underlying technology that supports and enables cryptocurrencies - blockchain and distributed ledgers.  Whilst DLP technology has been around for some time, its adoption remains limited - mostly focused outside of the mainstream financial services (Crypto; NFTs etc) or limited to very rules based / contractually defined areas (e.g. Trade Finance).  The opportunities which this technology can unlock are vast. Conceivable use cases extend beyond just financial products and could also include operational flows:
  • Digitalisation of Portfolios of Financial Assets - leveraging the block chain to price the tokenised assets and provide real time alerting if certain trigger events are met (e.g. MiFID II's requirement to alert where portfolios decrease in value by 10% within a day), or by facilitating more accurate margin monitoring of the portfolio and reducing the amount of client assets needing to be tied up as collateral for credit positions
  • Establishing accessible and immutable data that could be used as evidence of "Source of Wealth" and significantly streamlining onboarding journeys for Private Banks and Wealth Managers.  This could also result in a reduction in the data, which is required to be held on individual clients, who can be far more empowered and in control of their own data as the clients will own the decision to allow a Financial Service provider access to their "identification blockchain"
  • The proliferation of digital assets, not only in terms of financial products, but also other types of digital media, such as photos, social media profiles, streaming accounts and so on will need to be addressed as part of the succession planning process.  This is an area which could be a use case for embedding Wealth Management capabilities as part of a wider process.
• Education - finding ways to provide clear, supportive and engaging learning capabilities for clients, building their confidence and establishing trust in the Wealth Manager facilitating a high conversion rate when using self-serve digital tools
• Trusted Influencers - treating social networks as a channel through which to educate, influence and build trust in Brands, thereby allowing Wealth Managers to tap into a client base at any time.
• NextGen Estate Planning.  As with many areas of Financial Services, the automation of estate planning capabilities has accelerated since the Global Pandemic and lockdowns.  Provision of D2C services that digitize and automate will writing or provide digital notarization services is growing, providing a more streamlined and lower cost service to clients.  Whilst not always applicable, especially for the top end HNW or UHNW clients where the level of complexity of the succession planning is likely to require more manual intervention, for individuals in particular, the automated services will be greatly appreciated.

Wealth Management remains a very lucrative market in the UK.  Wealth Managers who can attract clients, deliver great client experiences which align to their clients’ underlying beliefs and values will be highly successful.  This is not easy.

The products and services which form the backbone of Wealth Management are often complex and not widely understood by all.   Consequently, ensuring Wealth Managers engage their clients in a way that drives increased financial literacy and understanding is paramount.  Better informed clients will be more confident to leverage the services provided by Wealth Managers, especially via digitally led engagement strategies, and ultimately achieve their financial goals. This will help Wealth Managers drive a lower cost-to-serve, which can only be a win-win for both clients and Wealth Managers. It also offers greater flexibility for Wealth Managers in terms of the changing regulatory landscape in the UK, client outcomes become a focus for regulators.