The Music is Starting to Stop

Recent years have been extremely lucrative for wealth advisors; both the independents and full-freight firms. Low cost of capital, booming public markets, and a growing desire to diversify into new products are all ways wealth management firms can grow AUM and, as a result, grid payouts.

However, the last two years have brought the proverbial record scratch; McKinsey reported that in 2022, cumulative assets managed by wealth managers contracted by an aggregate $6.2T putting immense pressure on firms to adapt to a new wave of client expectations. The other phenomenon of recent years? The emergence of Generative AI, sending industries scrambling to leverage digital brains for accelerated business operations and improved customer experiences. But why, and where to start?

Internal Operational Pressures

Wealth management business leaders are experiencing significant operational pressures:

• Revenue and margin pressure: Typically seen as a reliable topline and profit driver for major banks, declining (or decelerating) market values are making AUM-based revenue models vulnerable to digital startups through fixed-fee and other pricing models that are simple and predictable for clients. One way to combat this is by enabling advisors with a holistic ‘Customer 360’ view of their client’s current assets, automated insights into proposed investments and cross-sell recommendations. This modern approach can help advisors bring tailored new ideas to their clients at the right time.
• Increasing cost models: When things are going well, the case for investment is easy. The last several years enabled wealth management firms to hire armies of advisors and drive up overhead. However, as market values declined and stabilized, costs as a percentage of AUM have increased significantly. While the natural inclination is to cut spending, this may be an opportunity to optimize and reimagine front to back office operations. From client acquisition through retention, firms need to develop a well-oiled, automated sales and marketing machine.
• Digital operations and experience: These challenges have opened the door to digital advisors that lean mobile-first and target the “mass affluent” rather than focusing on in-person advisory experiences for HNWIs. In fact, 50% of wealth clients believe advisors should improve their digital capabilities. Minimizing advisor time spent on non-advisory tasks would enable a hybrid approach of white glove service with digital engagement to deliver advisory services flexibly in the face of changing demands.

The Automation Opportunity for Wealth Management

Wealth management is due for its next wave of innovation, leveraging AI and automation. Firms are exploring how and where AI can assist, given the universal need to provide leverage to advisors.

Examples of AI-driven leverage for advisors include

• Custom proposal development
• Cross-sell recommendations based on peer insights
• Summaries for client meetings
• Triaging client questions via chatbots

Automation of these tasks allows advisors to reclaim precious minutes that accrue to top-line growth through client recruitment, retention, and cross-selling. Driving value with AI effectively will require examining wealth management operations through the lens of front, middle, and back office operations to orchestrate a resilient yet flexible set of workflows powered through APIs. To do that, the technology that powers wealth management needs to be stitched together in a fabric that can be composed and adapted along with the firm’s business model in the face of emerging demands and expectations. Learn more about how enterprise orchestrations can work for you at workato.com.