Wealth Management in the UK – Part II

In my previous blog, I explored the UK Wealth Management market, and delved into one of the key themes I identified.  Specifically, this looked at the hybrid digital advice journey, supporting both existing and future clients through a digitally led advisory offering, but with the need to have touch points leveraging a more traditional Relationship Managed approach.

To achieve this hybrid digital approach, data, improving financial literacy and democratizing investment products is critical to support Wealth Managers deliver good client outcomes, as required under the new regulatory regime, and to empower future clients to optimize the opportunities for wealth management.

In part II of this series, I will explore the data theme further.

Data is King - leveraging data to genuinely drive decisions

To be able to offer hyper-personalised services[1] data is critical.  This level of service is not only expected by clients within digital channels but required across all channels to maintain cohesive and consistent client experiences.  Additionally, in the UK, the upcoming Consumer Duty places the burden of demonstrating a Wealth Manager has focused on achieving good outcomes for their clients on the Wealth Manager, requiring a more robust audit trail of actions taken throughout the full lifecycle of the client relationship.  This outcomes focus may have a different meaning depending on the nature of the Financial Service provider offering the service.  For example, a Universal bank may need to consider all positions held by the client and tailor their advice accordingly – reducing loans may be a better outcome than recommending investments into a pension or ISA.  This level of burden may not be applicable to pure Wealth Managers, who do not necessarily have this data on the client.

Wealth Managers have access to very sensitive personal data, which is needed to comply with regulatory obligations (KYC/CDD/EDD/AML), but these have been kept within legacy data stores which are difficult to manage, especially given the regulatory recognition of data ownership vesting in individuals and not data controllers.  Consequently, the data which allows for hyper-personalisation is not readily accessible or available to Wealth Managers, as they cannot fulfil the obligations of the likes of GDPR.  How then, do they achieve this, without increasing their regulatory burden?

One potential way is to leverage a wider technology ecosystem, which not only allows access to more modern and flexible technology solutions, but also potentially provides access to a much broader potential client base.

• Embedded Finance and Wealth Management-as-a-Service are flip sides of the same coin.  Embedding Wealth offerings represent a significant opportunity.  What though, are the ecosystems that warrant Wealth being embedded?  Unlike payments, Wealth management is not a direct requirement to achieve an immediate end, so having a BNPL option, or instant credit decisioning at point-of-sale doesn't hold as a use case for Wealth Managers.  Perhaps it is in wider financial industry journeys where it needs to be triggered:
  • As part of the mortgage process?
  • When signing up for Independent Schools?
  • Rounding up the change to build a savings pot for micro-investing once minimum buy-in amounts are reached?
  • When starting a new job and understanding pension options?

Or perhaps, it needs to partner with experts in digital front-end capabilities in a similar way that Goldman has done with Apple, providing the financial service of the Savings capability, but through the Apple ecosystem.  Apple don't have a banking license, but they are leaders in client experience, so embedding services in this way allows organisations to focus on product and operational excellence, whilst benefiting from partnering with the best at client experience. 

Establishing a partner ecosystem with non-financial industry leaders (Apple; Amazon; Google) not only gains access to a much larger client population but will allow for greater data analytics which in turn, allows even greater focus on exceptional product development, which is a win-win-win for all involved.

• Accelerating Client Testing to earlier in the product lifecycle.  Utilising Design Led Thinking techniques facilitates the identification of new ideas (products; services; client propositions; staff tools etc), which, if done in parallel with accelerated client testing earlier in the product lifecycle, will drive improved product design and therefore deliver better value to organisations by validating the services, products and features that most align to what a client wants.

• Investing in data solutions.  Across many organisations, there is a reluctance to prioritise limited strategic investment funds on initiatives that don't have a strong business case founded in Cost Reduction or Revenue Generation.  In many circumstances, investing in data can only achieve these types of benefits as secondary outcomes of what the data platforms enable.  Senior Management, whilst recognising data as a strategic imperative, need to make sure they sufficiently invest in data solutions to drive increased value.  This doesn't necessarily mean big data lakes, but the right data strategy can certainly improve the effectiveness of decision making, improve client experiences, reduce the regulatory burden, and in some cases, reduce the cost of implementation of strategic capabilities by making the data integration easier.

In the next article in this series, I will build further on this, having explored an aspect of the client engagement strategy (hybrid digital advice) and the importance of data to Wealth Managers and explore further the democratization of the products and services which are provided by Wealth Managers to their clients.

[1] Hyper-personalised services are those which are specifically tailored to an individual client based on information known about that client.  This is different to personalized capabilities, which are targeted at “personas” as opposed to specific to an individual.