Mobile Wealth Management: Impact of a New Generation of Wealthy Clients on Wealth Management

Some companies have challenged much larger peers who have dominated the sector for decades by using technology to develop digital products. With accelerating technological development over the last 20 years, we see how new achievements from innovative companies had a negative impact on companies that were once pioneers in their field but failed to embrace new technology. This was dubbed “disruptive innovation” by Clayton Christensen, Harvard Business School Professor.

Over the last two decades, the digital revolution altered several sectors, including transportation, banking, and entertainment. Now, these winds of change are blowing on wealth management, one of the most prominent sectors in the financial services industry, with countless digital tools and technologies that should completely change the relationship with their customers adding a new competitive dimension to service providers. 

Yesterday's Solutions no Longer Fit Today's Problems

User experience determines the success of interaction with clients in wealth management. The business model of most wealth managers still relies on traditional channels that lack speed, efficiency and transparency, to communicate and interact with clients. All this affects user experience negatively and limits the options, which is no longer sustainable following the dramatic changes in a customer base that prefers smart solutions.

For example, limiting interaction to e-mail and withholding information about investment opportunities are no longer acceptable for most wealth management clients.

Besides the shift to a customer base with higher expectations, operating cost efficiency and the ability to attract new customers have emerged as critical competitive dimensions, which compels wealth managers to use digital tools and technological solutions.

However, the wealth management industry remains among the slowest financial service sectors to react and adapt to the new developments. To date, most companies in this sector have yet to embrace digital transformation, which limits their ability to meet changing customer expectations. Fortunately, there are some exceptions.

New Heirs

In recent years, the changing demographics and the transfer of wealth to “generation X" (born between the mid-1960s and the early 1980s) and "generation Y" (born between the 1980s and 1990s) represented a major challenge for wealth management. Both generations have lived through a technological revolution that affected various aspects of their lives and they are dissatisfied with all traditional financial services solutions.

Deloitte estimates that $50 trillion of wealth will move from one generation to another between 2017 and 2060, which is the largest wealth transfer in history. Similarly, Wealth-X expects some $15 trillion of wealth to move to a new generation by 2030.

These new generations that have started to own a larger part of the wealth expect innovative services from wealth managers. This generation wants more of everything—more information, more tailored data, more investment opportunities, more transparency, and more interactive services quickly, efficiently, effectively, and accurately.

Unfortunately, most wealth managers fail to fulfill such demands, and cannot adapt to the technological revolution and provide more digital solutions to their clients. This is no longer an option amid the accelerating technological developments. Companies in this sector must build digital capabilities to retain clients and attract new ones. The wealthy will not hesitate to replace them with whoever offers more value for money.

Impatient!

Based on historical data, the transfer of wealth from one generation to another has led nearly 90% of the heirs to replace their financial advisors. So, digitization must be the top priority for wealth managers. Wealth managers must provide digital tools and smart technological solutions to continue managing the wealth that has moved to a new generation with unlimited expectations, especially amid the fierce competition.

In a survey by Roubini ThoughtLab, about 50% of investors said they were ready to replace their wealth managers if their expectations are not met. They are just too impatient.

It is important to understand that wealth management clients are also clients in other sectors that have adopted digital and technological solutions. Anyone anywhere can get so many services at the click of a button anytime easily with no fuss. And this segment is unimpressed by wealth managers’ excuses about regulatory obstacles, weak infrastructure, and the related costs.

Clients notice and know only too well that user interface of wealth management firms is slow and primitive, or that its information is insufficient and irrelevant, or that customer service is unfriendly and unresponsive. Clients compare their experience automatically with more digitally advanced sectors, such as e-commerce.

New Digital Platform for Clients in Saudi Arabia

In the Arab World, The Family Office has emerged among the leading wealth management firms. Since its establishment in 2004, The Family Office has managed more than $2 billion of wealth for more than 200 ultra-high-net worth individuals and families across the region through its five global offices in Manama, Riyadh, Zurich, New York and Hong Kong.

Seven years ago, The Family Office, headquartered in the Bahraini capital, realized the importance of digital tools and solutions in wealth management. In 2014, the company began building a digital platform that offers a better investment experience to clients at all levels.

In February 2021, The Family Office announced the launch of its digital platform as a mobile application that gives clients more control over their investments and greater awareness of the most intricate details related thereto. The most prominent feature of this unique digital platform is that clients can browse countless alternative investment opportunities, such as private equity, real estate, and private credit, and choose the ones that best serve their investment strategies, which in turn promote transparency and a level playing field.

More importantly, the digital platform introduced just a few months ago allows clients in Saudi Arabia to start their investment relationship digitally in a very easy paperless process that is integrated with various Saudi government systems. With the ever-increasing importance of information in financial markets, The Family Office platform features content from top analysts and sector experts.

This application allows instant access to the latest client portfolio updates at the click of a button, including the latest net asset values of the portfolio, which belies the complex underlying operations of data retrieval, calculation and audit.

Finally, other wealth managers in the region should follow the path of The Family Office to survive in the next decade.