While digitalisation has begun to transform some parts of the global private banking industry over the last decade, many large US wealth firms have lagged the trend. Those faring the best during the coronavirus crisis have invested in dedicated client portals, which go well beyond video calls.
“Everyone has Zoom for video chats – which is why their stock has gone through the roof – but investors need a self-service portal, allowing them to view their portfolios and understand what is going on in the markets,” says Doug Fritz, co-founder of US west coast technology consultancy F2 Strategy.
“A lot of firms resisted this and do not have it. They wanted the adviser to be in charge, not the client. Clients are the ones who want a digital experience and they appreciate it a lot more than their advisers do,” says Mr Fritz, who also co-ordinates the Wealth Tech Innovation Board, bringing together 70 chief technology officers, innovation leaders and digital private banking bosses at North America’s leading wealth managers.
Wake-up call
The board’s latest comparison of business continuity plans has acted as a wake-up call for some market players. The survey, conducted between 19 to 21 March, to help wealth firms determine the impact of the Covid-19 pandemic crisis on their organisation, found some wealth managers woefully unprepared for the disruption, with the largest players among the worst offenders.
Although the technology infrastructure has held up well, the transition to working from home has proved a major obstacle for some wealth managers.
“One of the largest US banks prepared for a disaster emergency by moving employees to a different office, as they were expecting a tornado or hurricane rather than a virus,” says Mr Fritz. “They had nothing in place for tens of thousands of wealth advisers to work remotely. Several large wire houses faced a significant struggle to get remote working set up.”
Another major brokerage has, for many years, resisted society’s trends towards home working, failing to develop relevant technological solutions. “The ‘work from the office’ mentality at some of the largest Wall Street houses is a cultural problem, which has prevented them from installing the tech,” adds Mr Fritz.
Processes for electronic money transfers at some US wealth managers have fallen behind the global industry. “Many do not have ways of taking in cheques from clients or the ability for clients to wire large amounts of money,” he says. “Because they are not automated, advisers are having to go to the office and scan or deposit cheques. This is not working well in the current situation.”
Heading for the door
These service deficiencies will quickly lead to clients leaving one wealth manager for a rival, believes Mr Fritz. During a survey of WTIB members in 2019, 64 per cent of wealth managers admitted they were worried about losing clients to other firms due to a poor digital experience. Those fears may soon be realised.
“The reality in April 2020 is that if you sit on the fence, your clients leave you,” warns Mr Fritz. “If they have no access to electronic documents, they have to rely on FedEx or going to the post office. This will lead to a big shift in client behaviour, as they move to firms with a much more sophisticated digital experience.”
Three years ago, most private banks realised that digitalisation of wealth management would not mean the disappearance of advisers, despite a “temporary robo-sizzle in the marketplace”, says Mr Fritz. “Clients will not desert the advisory model, but they may leave for a different adviser due to a poor experience.”
Most clients have two or three other wealth management relationships and can easily switch loyalties according to which bank is delivering the best service.
“They spread their wealth around and are having many digital experiences,” he says. “Every client has a side hustle, they have a ‘paramour’ somewhere else, where they are getting a better experience and wealth firms forget this.”
Cataclysmic moment
As a result of the current crisis, Mr Fritz believes the vast digital, cultural and demographic changes – which would have taken the whole decade of the 2020s to transform private banking – will now likely be squeezed into a “cataclysmic moment” lasting just two months.
He expects clients to demand round-the-clock advice and service from their wealth manager, ditching “the nine-to-five legacy model we have unfortunately clung onto for so long”.
Some firms such as Fidelity and Merrill, which have spent hundreds of millions on technology, innovation and predictive data for improving client engagement are already reaping the rewards, while competitors have a short time and long distance to catch up, believes Mr Fritz.
“In some cases we will end up behind and in others much further ahead, but the expectation of how a client works with an adviser will irreversibly change.”
