A survey conducted by Wealth X for the Financial Times last month found that two thirds of UK wealth managers are developing specific digital and online enhancements in the next year or so.
This was evident in the last week of financial results where Smith & Williamson confirmed it had spent £3.3m in modernising its IT infrastructure last year and Tilney revealed it spent £15m in 2017 on a “single, integrated technology solution”.
Jason Hollands managing director at Tilney described the platform as a “powerful tool” that will make life easier for the firm’s financial planners and investment managers and provide an enhanced client experience. It is also rolling out a MyTilney app to consumers within the next couple of months.
Mike Barrett consulting director at the Lang Cat says most firms have done a poor job in digitalising their businesses so far.
While Barrett believes technology will become increasingly important in the way wealth managers conduct their business he says it will “probably not be transformational”.
Conversely, Ian McKenna director of the Finance and Technology Research Centre (F&TRC) predicts the consequences for DFMs that are not considering their digital strategies will be dire.
“Firms in the wealth management space that aren’t now making a major investment in technology have actually decided to close down, they just haven’t consciously realised it yet,” he says.
Digitise vs digitalise
Tech spend in the wealth management space can be broken down along two lines – digitising and digitalising. The former involves changing the operational efficiency of a business through digital means, while the latter concerns bringing business activity to digital channels like creating apps for mobile phones and tablets, for example.
Barrett says all wealth managers should be investing in technologies to improve their back-office efficiencies to help cut costs and reduce the level of manual intervention, which carries a risk of human error.
He thinks DFMs that are releasing “cool and funky new apps” aimed at millennials are missing the point about how best to invest in technology.
St James’s Place, the largest wealth manager in the UK, does not have an app or client portal and yet has continued to capture market share and see robust flows, he points out.
“SJP place a very strong emphasis on face-to-face engagement with their clients rather than any technology engagement,” Barrett says. “The technology investments they are doing in bringing in a platform style technology is not about giving something to their customers and really radically shaping up the way their advisers work with their clients.”
McKenna disagrees that SJP is only interested in digitising its business, however. He understands that SJP is making “massive investments in technology” right now and doing “ground-breaking things” that haven’t been promoted yet.
At present SJP only has an investor relations app available for the iPad which allows users to view corporate documents, financial reports and video presentations all in one place and features an interactive share price tool.
Barrett says the digital propositions he has seen for customers from wealth managers are limited, barring a few exceptions. And he says the cost of delivering their services is still too high.
Holly Mackay, CEO of consultancy BoringMoney.co.uk, says investment apps have improved over the last two years. But she says most of the products from traditional DFMs and robo advisers are still just publishing apps, which allow users to view documents and account balances but not much else.
She also finds them to be “too product-centric”.
“Groups don’t think very much about the entertainment or engagement,” she says. “Just because something is a digital channel doesn’t mean you can take the age-old product-centric approach and shovel it out digitally, which is slightly what is going on.
“More specifically on the apps and the mobiles, there is still a lot of ‘come in and read our three million articles about emerging market equities’ but there is not enough interaction or tools to allow users to do stuff.”
There are a few exceptions out there, Mackay says, like Hargreaves Lansdown’s app which she says is “brilliant”. “You can trade, it is easy to navigate and you can see where all your stuff is.”
She also rates apps from Moneybox, True Potential and Nutmeg.
McKenna highlights Seven Investment Management’s 7IMagine app, which he says is “genuinely groundbreaking” and “a great example of where wealth managers can go”.
Though McKenna admits it is still “early days” in the digitalisation of the wealth management space, he says firms that do not make their services available via multiple digital channels risk becoming invisible to future consumers.
“Today, consumers are choosing to assimilate information on a whole load of different channels,” he says.
“If you do not choose to appear in the channel they choose to select, you are actually out of sight. If you are not visible in the customer’s channel of choice you are not really their adviser anymore, you are on your way out the door. They are getting that information digitally from someone and if they’re getting it from somewhere else, they’re halfway to moving their assets to that other party.”