Choice Versus Personalization: A Challenge Wealth Managers Must Meet
The evolution of wealth management is being led by companies rapidly deploying technology. Forward-thinking wealth managers and fintechs are shaping the digital agenda by using technology to create better experiences for more customers, meeting the demands of more customers than ever before. This is known as hyper-personalisation.
Hyper-personalisation is growing across financial services because customers are more digitally-enabled than ever, demanding knowledge and solution at their fingertips. Hence, they want products and services that closely match who they are and what they want. Wealth management must respond to these demands or they risk losing a generation of customers.
As Christopher Low, a Managing Director at Accenture’s Accenture Wealth and Asset Management Services recently said in our recent M Magazine:
“What Wealth Managers have got to be able to do is marry up where to invest in new technologies versus where they get a return for our equity. That’s because there is an awful lot of trial, test and error, and those that have got the agility to put in some tech and solutions, test and see if it works and if it doesn’t, get rid of it quickly and replace with something else, they’re the ones who will be at the forefront of the digital agenda.”
One of our core values at Mudano is “Start Now and Prototype” and this philosophy could not be any more pertinent to the Wealth Management industry.
Demanding customers and shifting demographics
Customers today are demanding the same level of service and technology from financial services as they do from technology brands, such as social networks. As a new generation of customers begins to use various forms of financial services, the demand will grow for high-quality, tech-led products and service that focuses on hyper-personalisation.
Fintechs have built products and marketing campaigns that have delivered customer-centric experiences. Millennials and Gen Z-ers have reciprocated by giving them their custom. If they don’t respond, traditional financial services providers risk losing these customers, and possibly forever.
Wealth management is susceptible to this threat as this generation is either acquiring wealth or is on the path towards it. The wealth management industry must adapt and build better products and services that suit this generation or fintechs will continue to dominate.
The good news is that the proliferation of data throughout financial services is increasing, as data is acquired from a huge range of sources. The key for wealth managers will be to use this data to build products and services that customers actually want, the type that matches their needs. They want products and services that are, in a word, personal.
Personalisation versus ‘overchoice’
Many people think personalisation simply means more choice. If I have many options, I am free to choose a service or product that suits my needs. ‘Overchoice’ should be a positive.
A problem of overchoice is illustrated by how some fintech companies try to offer customers “access to financial freedom”, or deliver on the utopian promise of some other tagline. They offer all users all things. For example, some platforms offer customers the choice of keeping cash on deposit or investing in a hot cryptocurrency. But these options aren’t good for amateurs.
Just because you have the option to do something it doesn’t mean you should do it. Of course, wealth management firms should offer a wide range of solutions but wealth management leaders should be aware that personalisation means removing a lot of the choice for individuals.
Personalisation doesn’t mean more choice. Rather, it means less choice and more bespoke service. In creating an experience that is tailor-made for an individual’s needs, options are replaced by products and services designed for them.
In a personalised future, especially for high net worth individuals, products should not feel like they were made for just anybody. A square peg in a round hole is just that no matter how snug the fit may feel.
Personal means built for you
The huge amount of data that can be tapped into by financial services firms can give them a much better overview of an individual’s personal preferences. Data and technologies, such as AI, should allow them to personalise a range of products for users, especially newer users. This is especially true in sectors, like wealth management, where client service is key.
But the word ‘management’ in ‘wealth management’ does not mean using data and AI to provide a slick front-end platform with no backend. Wealth management means a holistic approach to client services, where strong relationships are built by human expertise whilst insight is gained from AI-driven data exploration. It’s that combination that leads to bespoke service.
It is vitally important that all wealth managers harness all tools at their disposal in order that they know their customers. Wealth management is changing and new customer bases are growing up, wanting more personalisation, choice and experience. They will require a different type of wealth manager who understands their needs – but if firms adapt, they can use technology to increase quality of their products, levels of service and, ultimately, profitability.
Personalisation isn’t just offering more, new products that fit new demographics. It is a firm-wide commitment to utilising technology, focusing on providing a level of service for customers that make them feel as if these products are designed for them. Whilst that sounds like a tall order, it is the only way that wealth management firms of the future will stay relevant and profitable.
Those that capture the moment and embrace data as a driver of personalisation will be the ones that succeed.