Financial services technology (FinTech) is rapidly transforming wealth management firms into digital enterprises. In Q3 2021, BCG reported that the FinTech sector saw a 173% increase in spending compared to the same quarter one year earlier.
Wealth management trends for 2022 illustrate just how vital new financial technologies are, and how they help wealth management firms and other financial institutions compete for business, perform better and reduce costs.
Consumers are rapidly moving online and expect wealth management companies to provide digital offerings that match their in-person services. From investing and trading to account management and withdrawals, every online transaction requires technologies and security measures that can take time to implement and cost money for wealth management firms and the like. However, the investment is non-negotiable in order to compete for customers in today’s market. A recent report shared that 77% of financial advisors in the US and Canada have lost business because they didn’t have the digital capabilities to attract customers.
Here are some of the categories of technology that wealth management firms should be implementing to better serve their clients in 2022.
Basing financial decisions off of big data can help investors pick long-term investments for their clients that will weather future changes. Deloitte notes that big data has led to the use of “automated cognitive” analytics, drawing insights from dozens of data sources, from the weather to individual stock prices. This can help inform investment decisions, as well as other business processes like marketing and sales.
Automation increases efficiency and decreases costs for wealth management firms, and also can create a better customer experience for clients. For example, automated customer relationship management technology will make it easier for wealth management professionals to communicate with their clients by allowing them to track customer information and be alerted when they need to follow up.
While many firms have shifted their computing to cloud services to reduce costs, the future trend is to go “cloud native.” This approach provides the most flexibility and control because the cloud service is fully created and built by the firm, so it is custom-fit to their needs while still providing the benefits of cloud infrastructure. Cloud technology is incredibly important, especially for wealth management firms with remote employees.
Wealth management firms are attractive targets for cybercriminals, not only for the amount of money they manage, but also for the data that they have about clients and companies. The average cost per breach is estimated to be $5.86 million. With so much at stake, it’s important for wealth management firms to continually monitor and update their cybersecurity capabilities. Weak links in the system can come from password breaches, email scams, hacking into databases, and more. Each threat requires new innovations to keep information secure, from the latest in multifactor and biometric authentication to password management software and more.
With younger generations beginning to seriously invest and increasingly taking over the market share, wealth management firms are starting to implement AR and VR capabilities in order to better serve millennials and Gen Z. From enhanced screen experiences and chatbot-enabled conversations, to virtual techniques like gamification and virtual trading, these are some of the things wealth management companies are implementing to keep younger customers engaged and win their loyalty.
As always, the future is uncertain. But for wealth management companies, future-proofing is particularly important for attracting and retaining business in today’s tech-first (and volatile) climate.