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How digitalisation is driving the democratisation of wealth management

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What role does digitalisation play in the ongoing transformation of the wealth
management industry?

Over the next five years, there will be a huge generational shift in global wealth management. Many large portfolios are being transferred from the baby boomers to the younger generations, whose needs are fundamentally different. 

Wealth management is generally a service that is exclusively reserved for the wealthy, however for future growth, financial institutions must target other groups as well. Avaloq’s mission is to democratise wealth management. Automating processes to increase efficiencies, as well as enhance the digital customer experience, will be fundamental to achieving this aim. 

Technology can enable wealth management products to be offered in a more scalable manner, which ultimately will benefit less wealthy customers, helping a larger portion of the population to reach their financial goals. Meanwhile, financial institutions are able to tap into new markets. This includes the lucrative Asia-Pacific market, in which there is currently huge potential in the emerging middle class. 

Increasing automation means we can finally eliminate the perception that wealth mangers are only for the super rich, and all the while wealth managers can better cope with technological and generational changes.

How has the wealth management sector’s approach to technology evolved in
recent years?

The importance of technology in wealth management is growing rapidly. Sales and client enablement are increasingly operating via digital channels. COVID-19 has been a catalyst for digitalisation in wealth management and it is going to accelerate this development even further. As a result, digital channels with real-time straight-through processing, or STP, are becoming increasingly important for customer engagement and management. 

A high degree of automation and clean data storage are essential, enabling wealth managers to implement processes in real time and generate actionable insights from them. Also artificial intelligence is being used to advise end-customers, as well as for client relationship management or client engagement. However, there are numerous challenges involved as wealth managers require agile and intelligent platforms to orchestrate all these processes.

Can you expand on the specific challenges wealth managers are facing?

Wealth managers should be able to concentrate on their core business, adding value for their customers. All other processes, such as the back office, should be automated as much as possible to maximise efficiency. Wealth management will become a service that is integrated transparently into many process chains, but the greatest challenge to achieving this is the proper storage, management, verification and consistency of data. 

There are very few providers that can automate the entire process chain

There are still too many data silos, which wealth managers will have to abandon, especially in light of ongoing digitalisation. Nothing works without perfectly prepared data. The pandemic has exacerbated the challenge because in many regions employees can’t manage clients from home without violating regulation. That means, for example, client-identifying data must be separated from non-client-identifying data. Intelligent automation supports wealth managers not only on the operations side, but also in advisory. It helps enormously if advisers can see all relevant information directly when exchanging information with clients.

How do younger customers want to interact with their wealth managers?

When it comes to engagement, it is important for clients to be able to contact their advisers through their preferred digital channels and not through some separate new app. Clients want to communicate via platforms they also use privately in their everyday lives and on which they feel comfortable, such as WhatsApp. 

COVID has accelerated progress in this area and ultimately it will lead to more homogeneity in the wealth management industry. At the same time, the use of cloud-based services is increasing. There is still a great deal of heterogeneity in the wealth management environment; each wealth manager has a different infrastructure. 

Avaloq is committed to facilitating collaboration between wealth managers. That means we develop the same code for many wealth managers with the relevant requirements of the individual firms. We do the same thing with the various systems. The move to the cloud allows us to bring about a degree of standardisation of systems that has not been possible before.

How is the rise of fintechs altering the wealth management landscape?

Wealth management is moving towards greater co-operation, especially between wealth managers and fintechs. In the past, many wealth managers took a DIY approach to developing their businesses, however fintechs have shown they can innovate with more agility than legacy incumbents. It is important that co-operation takes place via a standardised, open platform. 

We see huge growth potential over the next few years in open banking and the resulting ecosystems in wealth management, which means co-operating with one another and agreeing on interfaces. It’s about developing truly integrated solutions and moving away from the old concept of best of breed. 

We are already well positioned in this area with our ecosystem, which we will continue to expand. There will also be some exciting use-cases in crypto and blockchain technology, such as crypto asset life cycles. We are firm believers in digital investments and already offer an integrated crypto assets solution.

How is Avaloq helping wealth management companies to digitally transform?

There are very few providers that can automate the entire process chain from end-customer to adviser, all the way to core settlement. We do that and power digital transformation in the wealth management sector through fully integrated software. 

We have recently introduced three new platforms to enable companies to meet the fast-changing needs of clients and what they demand of their wealth manager. 

Avaloq Engage, an artificial intelligence-based omni-channel engagement platform, automates customer support and interaction. By integrating all the wealth management functions, including advice, portfolio, trading, news and sales channels, Engage acts as a smart digital assistant for relationship managers, understanding messages and suggesting products or information to offer the customer. 

The Avaloq Wealth platform helps wealth managers meet the hyper-personalised expectations of younger customers who want to manage their financials in real time and invest with an individualised risk profile, while Avaloq Insight is a federated learning system for data preparation. It does this through a machine-learning algorithm that processes data across all participating clients. 

Such innovative solutions are designed to boost digitalisation and to pave the way for the democratisation of wealth management.

Avaloq is a global leader in digital banking solutions, core banking software and wealth management technology. Based in Switzerland, the company has a strong international presence, including offices in London and Edinburgh: www.avaloq.com


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