In our last blog, we focused on how wealth managers may enjoy a competitive advantage in the post-COVID 'next normal' through a more digitally-enabled front office. This article focuses on broader strategies for wealth management leaders and addresses the key question: ‘What has changed since COVID-19?’ Are the industry’s strategic imperatives still the same, or are there important changes that need to be considered?
Resilient wealth management business model
Our latest study “Navigating towards a 'next normal’ after COVID-19: Lessons from APAC wealth managers”, based on discussions with more than 25 executives in Asia Pacific, closed on a positive note for wealth managers: business models have proved resilient, and the global COVID-19 pandemic has not altered fundamentally the industry's strategic imperatives. If anything, wealth managers need to prepare for an accelerated adoption of these imperatives in the ‘next normal’, and engage with their sophisticated clients by exploring new edge business models (e.g., digital communication channels with central teams, hybrid advisory models, or offering an ecosystem of a broader set of partners to clients).
HNWI clients open to new ways of digital communication
The experience of many high net worth individuals with digital ways of communication has been positive, and they may be open to new models of doing business in wealth management. Taking into account shifting client demands as well as the potential for digitalization across the front office (see our last blog), we believe that successful wealth managers will adopt a number of key imperatives going forward.
Evolving strategies for future leaders
Most importantly, future leaders will push ahead with edge business models for digitally-savvy client segments and will pursue an active M&A growth strategy (and potentially benefit from attractive valuations of acquisition targets). They will develop efficient hybrid advisory propositions, switching seamlessly between channels and engaging digitally with prospects through in-house digital marketing capabilities. They will boost staff productivity through artificial intelligence and align their skills to shifting client demands. Lastly, they will explore cloud-based platforms and software solutions to accelerate innovation and further industrialize their middle and back offices.
Increasing regionalization – at the expense of globalization?
As a further outcome from the COVID-19 pandemic, we believe that in a ‘next normal’ many governments around the world may continue to observe closely or tighten their border regimes – a trend which, according to observers, may lead to greater regionalization of economies at the expense of globalization. In a wealth management context, client flows from certain regions or countries may be restricted or more closely regulated, or the global sourcing of physical products and external services may be impeded (e.g., through increased security measures or new tariffs). Wealth management leaders should monitor developments closely and plan for alternative scenarios.
In summary, we believe that the COVID-19 pandemic will further accelerate the differences between ‘winning’ wealth managers that explore edge business models, increase their operational agility and engage digitally with their clients – and other firms with a more reactive approach that may struggle increasingly in a wealth management industry that is bound to become even more competitive.