Is hyper-personalisation the future of wealth management?

Com­pe­ti­tion is increas­ing in the wealth man­age­ment sec­tor. Accord­ing to a recent sur­vey by Netwealth, a tech­nol­o­gy-pow­ered wealth man­ag­er, a third of wealth man­ag­er clients are con­sid­er­ing switch­ing to anoth­er provider – and it’s the best-off who are the most dis­con­tent­ed. Now, a grow­ing num­ber of man­agers are using hyper-per­son­al­i­sa­tion to improve their offer­ings and cement client rela­tion­ships.  

Using tech­nolo­gies such as arti­fi­cial intel­li­gence, data ana­lyt­ics and automa­tion, hyper-per­son­al­i­sa­tion allows wealth man­agers to stream­line port­fo­lio man­age­ment and make those port­fo­lios more rel­e­vant to the exact needs of the client. In the same way that Net­flix serves up a dif­fer­ent choice of pro­grammes and movies for each cus­tomer, based on what it already knows about them from their pre­vi­ous choic­es, hyper-per­son­al­i­sa­tion can take into account a client’s invest­ment goals, income and life sit­u­a­tion and more specif­i­cal­ly their inter­est in, for exam­ple, ESG invest­ing and emerg­ing mar­kets.

Along­side this, behav­iour­al sci­ence and sen­ti­ment analy­sis mean that wealth man­agers can now define the exact risk pro­file of each client more accu­rate­ly. Younger savers expect to have the abil­i­ty to track their invest­ments when­ev­er and wher­ev­er they want, using almost any con­nect­ed device. Advo­cates of hyper-per­son­al­i­sa­tion say that its abil­i­ty to cre­ate bespoke invest­ment options can also build trust, which makes it eas­i­er to improve client reten­tion and man­age inter­gen­er­a­tional wealth plan­ning.

In a recent sur­vey car­ried out by Forbes Insights and bank­ing soft­ware provider Temenos, 82% of respon­dents said that wealth man­agers who adopt hyper-per­son­al­i­sa­tion are more like­ly to suc­ceed than those who don’t. And 45% of those who took part in the sur­vey said that this tech­nol­o­gy would change their finan­cial guid­ance. Many wealth man­agers are aware that tech giants are speed­ing ahead with devel­op­ing and adopt­ing the new tech­nol­o­gy – and they don’t want to be left behind. 

Typ­i­cal of these new providers is Adde­par, which was found­ed because of con­cern over trans­paren­cy fol­low­ing the 2008 finan­cial cri­sis. With more than 700 wealth man­agers han­dling a total of $3tn (£2.38tn) of assets on its plat­form, it presents a client’s entire rel­e­vant infor­ma­tion on an inte­grat­ed dash­board. It pulls in data from var­i­ous sources, ver­i­fies then inte­grates it, allow­ing the wealth man­ag­er to present clients with accu­rate and per­son­alised options. The aim is to have a con­ver­sa­tion with clients and devel­op a nar­ra­tive – not just to show them graphs and sta­tis­tics. 

Yet pre­pared­ness for this ongo­ing shift dif­fers among regions, accord­ing to Rus­sell Andrews, glob­al head of advice solu­tions at SEI Asset Man­age­ment Dis­tri­b­u­tion. 

“Mar­kets that con­tin­ue to be dom­i­nat­ed by mutu­al funds are inher­ent­ly less able to sup­port true per­son­al­i­sa­tion at an asset man­age­ment lev­el. They rely on engage­ment to meet the need,” he says. “But evolved mar­kets, which already embrace sep­a­rate­ly man­aged accounts and oth­er more sophis­ti­cat­ed imple­men­ta­tion mod­els, have an exist­ing infra­struc­ture bet­ter equipped to apply port­fo­lio per­son­al­i­sa­tion.”

At a min­i­mum, wealth man­agers need to start per­son­al­is­ing their offer­ing beyond gener­ic prod­ucts and ser­vices. At best, irrel­e­vant offer­ings and advice will annoy clients. At worst, and as reg­u­la­tions con­tin­ue to be tight­ened, they might lead to alle­ga­tions of mis-sell­ing.

In the absence of an obvi­ous stan­dard solu­tion in the past, many wealth man­agers have been build­ing their own, says Jay Venkateswaran, busi­ness unit head, bank­ing and finan­cial ser­vices at busi­ness process man­age­ment com­pa­ny WNS.

“If you look across the top 15 wealth man­agers, they prob­a­bly have 15 dif­fer­ent solu­tions,” he says. “As well as adding their brand­ing, this allows each wealth man­ag­er to tell a par­tic­u­lar sto­ry to their client. These tools give them the abil­i­ty to tai­lor that con­ver­sa­tion and go beyond look­ing at charts to pro­vide insights and explore sce­nar­ios. For instance, they can show a client what will hap­pen to them if they stop work­ing at a spe­cif­ic age or if they decide to change their invest­ment strat­e­gy.”

Increas­ing­ly, hyper-per­son­al­i­sa­tion allows clients of wealth man­agers to mod­el these dif­fer­ent sce­nar­ios them­selves. How­ev­er, many wealth man­agers are still not exploit­ing the full poten­tial of the tech­nol­o­gy to cross-sell – and upsell. This is part­ly because exten­sive M&A in the sec­tor means that lega­cy sys­tems haven’t been inte­grat­ed. “Many wealth man­agers miss a trick because they haven’t iden­ti­fied that a client might ben­e­fit from an insur­ance prod­uct or that a mort­gage cus­tomer might have exten­sive sav­ings,” says Venkateswaran. “As well as improved inte­gra­tion of tech­nolo­gies, bet­ter data ana­lyt­ics are need­ed to help asset man­agers ser­vice clients bet­ter – and to improve their sales.”

One poten­tial mis­take, says Andrews, which is not exclu­sive to asset man­agers, is to build a solu­tion that nobody wants, under­stands or val­ues. “Asset man­agers have sig­nif­i­cant intel­lec­tu­al prop­er­ty and exper­tise in nav­i­gat­ing invest­ment mar­kets and man­ag­ing port­fo­lios,” he says. “That doesn’t nec­es­sar­i­ly trans­late auto­mat­i­cal­ly into solu­tions that meet the needs of advis­ers and end-investors.”

There are oth­er chal­lenges. Hyper-per­son­al­i­sa­tion relies on large amounts of data – the more of it that the wealth man­ag­er has, the more per­son­alised their offer. But data pri­va­cy con­tin­ues to be a con­tro­ver­sial issue. At the high­er and there­fore more prof­itable end of the mar­ket, an added com­pli­ca­tion is that high net worth indi­vid­u­als are like­ly to have assets in dif­fer­ent juris­dic­tions, each of which might have its own reg­u­la­to­ry require­ments, espe­cial­ly if not gov­erned by GDPR or ade­qua­cy deci­sions.

“It’s crit­i­cal to work hard to under­stand the exact per­son­al­i­sa­tion needs of advis­ers and investors for today and the future,” Andrews says. And then, find the right inno­v­a­tive solu­tions to deliv­er them.