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May 20, 2016
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The State of Global Wealth Management – Part 2: Big Data Drives Disruption

The first post in this three part series brought to the fore critical strategic trends in the Wealth & Asset Management (WM) space – the most lucrative portion of Banking. This second post will describe an innovation framework for a forward looking WM institution.The final post will cover technology architecture and business strategy recommendations for WM CXO’s.


The ability to sign up wealthy individuals & families; then retaining them over the years by offer those engaging, bespoke & contextual services will largely provide growth in the Wealth Management industry in 2016 and beyond. However, WM as an industry sector has lagged other areas within banking from a technology & digitization standpoint. Multiple business forces ranging from increased regulatory & compliance demands, technology savvy customers and new Age FinTechs have led to firms slowly begin a makeover process.

I contend that there are four strategic goals that WM firms need to operate across –

  1. Increase Client Loyalty by Digitizing Client Interactions – WM Clients who use services like Uber, Zillow, Amazon etc in their daily lives are now very vocal in demanding a seamless experience across all of the WM services using digital channels.  The vast majority of  WM applications still lag the innovation cycle, are archaic & are still separately managed. The net issue with this is that the client is faced with distinct user experiences ranging from client onboarding to servicing to transaction management. There is a crying need to be able to modernize these siloed architectures to provide a more unified view.
  2. Generate Optimal Client Experiences–  In most existing WM systems, siloed functions have led to brittle data architectures operating on custom built legacy applications. This problem is firstly compounded by inflexible core banking systems and secondly exacerbated by a gross lack of standardization in application stacks underlying ancillary capabilities. The consequence is that these inhibit client facing applications from using data in a manner that constantly & positively impacts the client experience.
  3. Automate Back & Mid Office Processes Across the WM Value Chain – The need to forge a closer banker/client experience is not just driving demand around data silos & streams themselves but also forcing players to move away from paper based models to more of a seamless, digital & highly automated model. These processes range from risk data aggregation, supranational compliance (AML,KYC, CRS & FATCA), financial reporting across a range of global regions & Cyber Security.
  4. Tune existing business models based on client tastes and feedback –While Automation 1.0 focuses on digitizing processes, rules & workflow as stated above; Automation 2.0 implies strong predictive modeling capabilities working at large scale – systems that constantly learn and optimize products & services based on client needs & preferences.

Having set the stage for the capabilities that need to be added or augmented, let us examine what the WM firm of the future can look like.


Improve the Client Experience

The ability of the clients to view their holistic portfolio, banking, bill pay data & advisor interactions in one intuitive user interface is a must have. All this information needs to be available across multiple channels of banking & across all accounts the client owns with multiple FIs (Financial Institutions). Easy access to investment advice, portfolio analytics and DIY (Do it Yourself) “what if” scenarios based on the client’s investment profile, past financial behavior & family commitments are highly desirable and encourage client loyalty.

Help the Advisor –

On the other side of the coin, most  WM advisors lack a comprehensive view of their customers. This is due to legacy IT reasons due to which their interactions with clients across multiple channels takes up a lot of their work time but also results in limited collaboration within the bank when servicing client needs.

Other “must have” capabilities –

  • Predicting Customer Attrition & Churn across both a single client as well as over a n advisor’s entire client base
  • Portfolio Rebalancing & risk modeling across multiple dimensions
  • Single View of Customer Segments across multiple product offerings
  • Basket Analysis based on criteria like investment preferences, asset allocation etc – i.e “what products are typically purchased in tandem”
  • Run in place analytics on customer lifetime value (CLV) and yield per customer
  • Suggest Next Best Action for a given client and across a pool of managed clients
  • Provide multiple levels of dashboards ranging from the Descriptive (Business Intelligence) to the Prescriptive (business simulation as well as optimization)

Digitize Business Processes –

Strategic investments in Business Process Management (BPM) systems, Big Data architectures & processing techniques, Digital Signature systems & augmenting tactical document management systems can result in a high degree of digitization. This leads to seamless business interoperability, efficient client operations and an ability to turn around compliance information quickly & more efficiently over to regulatory authorities.

Invest In Technology to Drive the Business –

Big Data & Hadoop provide the foundation to an intelligent approach to unifying data (ingesting, mining & linking micro feeds with existing core banking data) and then fostering a deep analytical approach based on predictive analytics and machine learning.

So what kind of new age business capabilities can WM firms build on a Big Data & Advanced Analytics based foundation?

  • New Client Acquisition by creating client profiles and helping develop targeted leads across a population of individuals
  • Instrument and understand Risk at multiple levels (customer churn, client risk etc) in real time
  • Advanced Portfolio Analytics
  • Performance Management Metrics for the business across client segments, advisors and specific geographies
  • Better Client Advice based on portfolio optimization which takes client life journey details into account as opposed to static age based rebalancing

The final post in this series will cover a high level technology architecture and then cover specific recommendations to WM CXO’s.

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