Game-changing technologies, shifting demographics, rising client expectations and reverberations from the COVID-19 pandemic have created a perfect storm. For firms to succeed in the coming decade, the slow, incremental change of the past must be discarded in favour of efficient operating models and transformative technology solutions that address changing market demand, are tailored to specific client needs and build scale through effective growth strategies.

Driving growth through new business processes

In the current environment, market trends and client preferences are evolving at a fast pace. To unlock new opportunities and drive growth, wealth managers need to adapt and consider transformation from within. For a sector that has strong ties to the past, the slower, traditional ways of operating may no longer offer an edge. Disruptive competitors are threatening to take market share and many incumbents are also following suit by adapting business models and going on the acquisition trail.

There are several major forces behind this dramatic change. Rising wealth levels, demographic changes and transformative technologies have become even greater forces in the industry. Investors are becoming wealthier, according to Boston Consulting Group, in the past 20 years, personal financial wealth globally has nearly tripled, rising from $80 trillion in 1999 to $226 trillion at the end of 2019.1

While the direction of travel in the industry was already clear, the COVID-19 pandemic has increased the speed of this change. Not only did it motivate companies to reconfigure their operations during a period of turbulence and turmoil, but it provided an opportunity for a permanent transformation. The objective was not simply to build resilience for periods of disruption, but instead to become fully digital and reorganise services to help make them more competitive, more profitable and more attractive for clients.

From a strategic perspective, firms that have well-defined objectives and capabilities are more likely to succeed. Digitalisation and automation can be used to streamline middle and back office functions, whilst client services should aim to blend the conveniences of technology with a human touch. Product development is also critical, as younger generations and new markets may require a different approach than in the past. 

Managing costs while investing in systems

The COVID-19 pandemic has put firms under pressure during a period when margins have been squeezed and costs have been rising. There are several factors driving this, including tighter regulations, the downward pressure on fees and increased competition in the market. While firms may be reluctant to commit capital to major projects, they could gain a better handle on costs and spur growth by making strategic investments in technology, product offerings and growth opportunities through mergers and acquisitions.

However, a key task for any firms to consider is how to reduce their cost base. This could involve removing unnecessary layers of management and optimising headcount and skillsets, while streamlining functions such as finance, human resources legal and operations departments. The next step is to transform operating models, which is focused on redesigning operating models and overhauling technology infrastructure. A key challenge facing private banks and wealth managers is to identify new ways of working that will allow relationship managers to be more effective and deliver products and services that maximise client satisfaction.

It is also critical that firms align their services and solutions with emerging market trends and client expectations. New technology is allowing firms to develop and bring to market new, cost-effective products at a faster pace than in the past, making it possible to meet client demand, remain competitive and helping them offer better value for money.

Through a programme of strategy cost-cutting, targeted technology investments and a sustained focus on providing high-quality service and value for money, wealth managers can put themselves in the best position to drive future growth.

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