Online rivals and investor evolution pose challenge for wealth managers

The past two years of Covid chaos have been a buck­et of cold water for wealth man­age­ment. Not only has the pan­dem­ic indeli­bly changed how the indus­try does busi­ness – clients are reassess­ing how they invest their mon­ey.

The indus­try aims to bring sure­ty and clar­i­ty to its clien­tele. How­ev­er, it’s faced a chal­leng­ing envi­ron­ment over the past year as it has shift­ed to remote work­ing. Mean­while, the explo­sion in meme stocks, trad­ing plat­forms and cryp­tocur­ren­cies means it faces huge com­pe­ti­tion in its ecosys­tem. 

On the one hand, man­agers have led clients through the nec­es­sary data pro­tec­tion and secu­ri­ty doc­u­ments. On the oth­er, they’ve lis­tened as the same client out­lines their invest­ments in the unreg­u­lat­ed and law­less world of cryp­tocur­ren­cies and non-fun­gi­ble tokens (NFTs). 

Online users today want two com­pet­ing fac­tors from remote-work­ing wealth man­agers — quick access to their mon­ey and the cer­tain­ty that that cash is pro­tect­ed. Mar­ry­ing these demands has been the biggest chal­lenge for wealth man­age­ment dur­ing remote work­ing.

Know your platforms

Smart wealth man­agers can achieve this by ensur­ing dif­fer­ent sys­tems can seam­less­ly talk to each oth­er, says Alexan­der New­ton, man­ag­ing part­ner for

Cam­bria Wealth Man­age­ment. “Know­ing that you only need to enter details in one sys­tem not only saves time, it also helps to reduce error by ensur­ing that we are all work­ing on the same client data. Con­tin­u­ing to link sys­tems to gain effi­cien­cies and improve the client expe­ri­ence is a nev­er-end­ing task.”

Suc­cess­ful wealth man­agers now offer hybrid advice via a pick and mix of com­mu­ni­ca­tions, ensur­ing the cus­tomer gets what they want, when they want it. Video con­fer­enc­ing gives per­son­al­i­ty and face-to-face access. Mes­sag­ing and col­lab­o­ra­tion tools like Microsoft Teams and Webex enable instant access, while prod­ucts like Docusign or Alt Ave allow for elec­tron­ic sign­ing of doc­u­ments. On the bespoke end, sophis­ti­cat­ed client por­tals have also appeared, allow­ing advis­ers and clients to work togeth­er through inte­grat­ed video and screen-shar­ing, says Tim Thomp­son Rye, chief tech­nol­o­gy offi­cer at Prog­e­ny.

“Mon­ey­In­fo and Cash­Calc have the abil­i­ty to trans­form the client expe­ri­ence pret­ty much overnight. The key ben­e­fits of these off-the-shelf options are instant access to infor­ma­tion like port­fo­lio val­u­a­tions, the abil­i­ty to sign, store and access impor­tant doc­u­ments secure­ly, and the abil­i­ty to com­mu­ni­cate with advis­ers secure­ly.”

Tech­nol­o­gy has changed the way clients think about their finances – and the way finance thinks about them, says Thomp­son Rye. “Sur­pris­ing­ly, we found the aver­age age of clients who use our por­tal is old­er than our over­all aver­age client age. Old­er clients may be more time-poor than younger gen­er­a­tions and there­fore val­ue the con­ve­nience to infor­ma­tion that a tech-led offer­ing can pro­vide. This goes against the per­cep­tion, or mis­con­cep­tion, that tech­nol­o­gy will pri­mar­i­ly be used by younger clients.”

Digital advantage 

In terms of com­pli­ance, dig­i­tal offer­ings can record all client inter­ac­tions, all of which can be mar­ried up to client files, says New­ton. “One of the ben­e­fits of com­bin­ing mes­sag­ing, email and video calls is we now have a more reli­able audit trail of our advice process. This links well with our back-office sys­tems, which auto­mat­i­cal­ly log mes­sages to client files. This doesn’t remove the issue of human error but does sig­nif­i­cant­ly reduce risk.”

How­ev­er, every item record­ed cre­ates a larg­er sur­face area for cyber­crim­i­nals to attack, with such inci­dents up 238% glob­al­ly dur­ing the first two months of the pan­dem­ic, says James McQuig­gan, secu­ri­ty aware­ness advo­cate at KnowBe4.

“Organ­i­sa­tions have shift­ed data and sys­tems to more cloud-based solu­tions for eas­i­er man­age­abil­i­ty and reduced costs,” he says. How­ev­er, with more users work­ing remote­ly and more data in the cloud, the oppor­tu­ni­ty for cyber­crim­i­nals to attack them as they are iso­lat­ed increas­es. This risk expos­es the organ­i­sa­tion to var­i­ous social engi­neer­ing and phish­ing attacks or exploits against the inter­net-fac­ing cloud sys­tems.”

While his com­pa­ny invests heav­i­ly in cyber­se­cu­ri­ty, Thomp­son Rye admits Prog­e­ny is defend­ing against more scams tar­get­ing end clients, who may be more vul­ner­a­ble or have less access to cyber­se­cu­ri­ty knowl­edge and train­ing. “We have a robust cyber­se­cu­ri­ty train­ing pro­gramme and have stepped up our client com­mu­ni­ca­tions about poten­tial cyber risks,” he says.

To con­tin­ue offer­ing advice out­side office hours, many firms have imple­ment­ed secure chat sys­tems that can only be used by ver­i­fied clients. This is backed up through cour­tesy and secu­ri­ty calls, says New­ton. “We still rely on back­ing up our dig­i­tal inter­ac­tions with a phone or video call. For any par­tic­u­lar­ly sen­si­tive sit­u­a­tions, our clients still need to feel that they are deal­ing with a per­son, rather than a com­put­er.”

Unpredictable competition

Remote wealth man­age­ment also faces the chal­lenge of com­pet­ing advice – good or bad – from the inter­net. Dur­ing August, shares in trad­ing plat­form Robin­hood increased by 50% in a sin­gle day, buoyed by ‘meme stock’ episodes – like the furore around GameStop – as work from home users became exposed to new prod­ucts. 

The biggest threat to remote wealth man­age­ment could stem from the low inter­est rate envi­ron­ment, with many peo­ple tempt­ed to spin the wheel on the casi­no of online trad­ing risk, says Anna-Sophie Hartvigsen, co-founder of Female Invest, an advice por­tal aimed at Gen Z and mil­len­ni­al women. “We’re see­ing a gen­er­a­tion of new investors who take charge of their wealth them­selves rather than del­e­gat­ing the respon­si­bil­i­ty to exter­nal sources.”

With increased work­ing from home, users also have more time to seek out alter­na­tive invest­ment oppor­tu­ni­ties and do their own study. Dur­ing the pan­dem­ic, mas­sive wins for trad­ing items like Doge­coin, Shi­ba Inu and GameStop shares became crossover news events, as investors sought both finan­cial gain and an adren­a­line rush, says Hartvigsen .“Invest­ing has increas­ing­ly become a top­ic on social media, which led to the emer­gence of a new phe­nom­e­non: meme stocks. As finan­cial edu­ca­tion becomes more avail­able and eas­i­er to access, we envis­age peo­ple being in the dri­ver’s seat of their own finan­cial jour­ney to a much high­er extent than before.”

To sur­vive, remote wealth man­age­ment should match these trends, not resist them. It must offer san­i­ty and calm amid the chaos of online invest­ing, as well as pro­vid­ing the tra­di­tion­al stan­dards of secu­ri­ty that cus­tomers have grown to expect.