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Welcome to the fifth part of our Q&A mini-series with some of the experts we interviewed in our recent Future of Investment Report...


What are the main drivers for digital transformation in the wealth management industry?

"There are several drivers. Being more efficient gives you the ability to be more competitive. In today’s world the margins that wealth management firms operate under are very small, so if you can invest in technology and become more efficient, even if it’s just by a few points of margin, that can be very meaningful. Firms need to be more efficient if they want to survive. Or they need to scale up, so we’re also seeing consolidation in the industry. That is driving firms to embark on this digital transformation journey and to invest in that just to be competitive. It’s almost like a survival instinct.

"Another pressure comes from the market because as consumers, we today are so accustomed to a digital way of doing business. If my financial advisor doesn’t do that or have that approach—such as paperwork being done electronically—it begs the question to the consumer, are they keeping up with the times? Are they trying to be as efficient as possible to provide a better service to me? I want to see my portfolio online and be easily accessible rather than have to wait for the paper statement in the mail."

What are the biggest challenges for adopting new technology?

"If you’re a small or mid-size wealth management firm, there is a ton of information out there but you can get lost knowing where to start. How do you transform the business? What do I do first? Do I expand my CRM initiatives or do I focus on the back office and take care of workflows? One of the challenges that we see today with wealth managers embarking on that journey is really having the understanding of how to bring the whole solution together so that it’s not piecemeal.

"Successful firms will typically adopt a strategy that is broken down into phases so it’s not just one huge boiling-an-ocean approach where it’s too much and the project fails, and you’ve wasted a lot of time and money and you’re no better than where you were before. You need to have a road map, you need to make sure it’s properly budgeted and resourced, and you need to execute on it. If you do that you will be successful and significantly more efficient as an organisation—but part of that is picking the right partners."

Can you tell us a little bit about how you are helping wealth and asset managers with cybersecurity?

"Since we deal with sensitive financial information, cybersecurity plays a significant role in all aspects of what we offer when a firm embarks on its digital transformation journey. They have to take many things into account including the systems and the partners they would need to align themselves with in order to get the systems that can support their growth. Part of the strategy around conducting business electronically includes cybersecurity because when you transform digitally you’ve got to address both the security aspects of your vendors who you’re working with to make sure they adhere to certain policies and procedures, and that they protect the data. That’s critically important.

"The major difference is that for the large institutional organisations they have significant budgets which they have invested in cybersecurity to protect their data and their organisation, while for smaller firms they tend not to have the budget to invest heavily in this. On one hand they don’t have as much data as larger organisations, so they’re not potentially direct targets for cyberattacks, but on the other hand, they still have sensitive information which they have to protect."

What are the biggest cyber threats and risks that wealth and asset management firms face?

"The major one is data because we’re talking about peoples’ financial information, so protecting the data is paramount. They’ve got to make sure that they know what data they are working with. Then more importantly have policies, procedures and systems in place to protect against an outside party trying to get in, because what we find is that the majority of issues are caused by employees not knowing or not following procedures. A simple example would be an employee taking a customer’s data and sending it in an unencrypted format to the customer without knowing the customer’s computer is being monitored by an outside agent, who is able to intercept that data and use it for a fraudulent purpose.

"So understanding that and making sure staff are trained on cybersecurity policies is critical. For smaller businesses, they’re typically not targets of hackers, but they can still suffer data breaches without realising. If you’re a firm that got into a situation where you’re not securing your clients’ data then many investors won’t want to do business with you as a result. If you don’t have your own house in order, how can investors trust you with their money?"

Click here to download the full report.

Post Author: Ben Edwards