Asian wealth managers are facing more competition than ever—and a majority believe that dynamic is only going to increase in the years ahead. More than 90% of wealth managers expect this decade to be more competitive, with almost a third expecting the competitive landscape to become even more intense, according to a Wealth Dynamix and Hubbis survey.
Meantime, more than 80% of managers expect Asia’s private wealth accumulation to outstrip other regions in the decade ahead. KPMG forecasts the region will grow 39% by 2024, the fastest pace of any region globally. With almost nine in 10 wealth managers expecting the market to grow rapidly, the size of the opportunity is huge.
Yet Asia’s private banks and wealth management firms are not ready to seize that opportunity. Only 30% of respondents believe wealth managers in the region are on the right path to take advantage of these growth opportunities, with 55% saying there is considerable room for improvement and 11% stating that firms are lagging.
Part of the issue is that many firms don’t know how to implement the change needed to become more competitive. For instance, fewer than one in five firms have a dedicated transformation management unit, according to Accenture.
At the same time, Asian wealth management firms are seeing increased pressure on their profit margins, mirroring the experience of wealth managers worldwide whose margins have eroded continually since the global financial crisis. Between 2007 and 2016, pre-tax margins at global wealth managers fell from 33 basis points to 22.4 basis points, according to Boston Consulting Group.
With competition increasing and margins being squeezed, wealth managers must find new ways to drive efficiency gains and cost reductions without compromising on client service.
Efficiency, however, is not top of mind. Wealth managers in the region are focused almost entirely on top line growth rather than on the efficiency and performance of the firm and its relationship managers, according to Accenture5. Other research corroborates this view. Only 25% of Asian wealth managers rank improving operational efficiencies as a top strategic objective, according to a KPMG survey. By contrast, 34% of firms are focused on improving service reliability, corporate resilience, and cyber security, as well as improving customer-centric strategies.
Accenture says there is one key issue hampering top line ambitions: relationship managers are already overstretched, and there is an insufficient pipeline of talent to meet growing demand for wealth management services. To meet wealth managers’ growth aspirations in the region, they would need to hire thousands of new relationship managers.
The growing regulatory burden in the region is also increasing compliance costs for wealth managers. That could be either through heightened risk (asking existing compliance staff to do more with the same level of resource, creating inefficiencies that results in regulatory failings and potential fines) or by expanding the compliance team (bumping up overheads).
Cumbersome manual processes are also a persistent drag on wealth managers’ ability to work more efficiently. Manual onboarding, for example, can add weeks to a process that potential clients now expect to be completed in a matter of days.
Adopting client lifecycle management (CLM) technology can help firms tackle operational efficiency in a more holistic way because it can streamline processes at every stage of the client journey.
For example, digitising the onboarding process can expedite the time it takes to get new clients approved by automating data capture and due diligence checks such as know-your-customer (KYC) and anti-money laundering (AML) rules. A CLM platform can also enable various onboarding processes to occur in parallel instead of sequentially, such as performing and tracking multiple due-diligence checks at once. Introducing such efficiencies and acceleration in the client onboarding process provides an opportunity to cement a client introduction by providing an example of the seamless experience of future client management. Not only will that increase the win rates of client acquisition strategies, it can also increase the revenue growth from AUM due to a shorter elapsed time to onboard new clients.
An efficient onboarding process can also produce cost-saving opportunities for the firm. Digitisation of the process can reduce the amount of admin needed by as much as 80%. Data captured during this stage can also be reused throughout the client lifecycle, meaning customers and relationship managers won’t need to keep re-keying the same information during every interaction. This assurance of consistency of data across the platform reduces the need for rework due to human errors and strengthens compliance controls across the business.
Automating manual tasks and providing self-service options for certain activities (particularly when targeting younger cohorts of customers) can free up relationship managers to focus on providing a more personalised service to a bigger book of clients.
A wealth management focused CLM system can also help firms simplify their tech stacks. Instead of having to jump between different platforms to perform individual tasks, specialist CLM tech can bundle everything into one integrated platform. Not only does that make it more efficient to use, it can also save firms money by not having to invest in a patchwork of point solutions that also multiply IT running costs.
Not only can a CLM system streamline internal processes, it can also be used to ensure that time is spent effectively on essential tasks. With the use of big data and in-built rule-base logics, smart alerts and recommendations can be triggered to prompt users to the next most effective actions to take. For example, a sophisticated CLM system may trigger notifications to relationship managers when clients’ document expirations are due. CLM systems can also assist in effective pipeline management by highlighting specific clients based on client sentiments or business’ management goals. These system-triggered prompts can enable the business to be more efficient as users are directed immediately to clearer prioritisations and key insights.
Some wealth managers may find the thought of digitisation daunting due to the perception of a massive overhaul of infrastructure that requires significant upkeep. However, the growing availability of Software-as-a-Service (Saas) cloud-based CLM technology could serve as a solution to these concerns. SaaS can replace firms’ legacy on-premise systems that are expensive to maintain and upgrade. Transitioning to the cloud removes a whole layer of IT maintenance expense, while also ensuring systems are always up to date—improving security and making new products available to clients instantly.
It may be difficult to envision the associated benefits that can be obtained with a digital CLM platform. By using the benefit calculator as launched by Wealth Dynamics, the monetary gains of adopting these CLM technologies can be visualised in a simplified manner for businesses to make clear business cases based on their needs towards an appropriate pipeline for digitisation.
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