As we have observed before, digital brands have done much better during lockdown than their analogue peers, but in wealth management it would be hard to describe any leading player as ‘digital’. This is an industry that has valued tradition and face-to-face relationships over investment in fundamental digital transformation.
Private banks and wealth managers have had much to deal with over the past decade, with the increasing cost of regulatory compliance squeezing margins, globalisation and changing client needs testing the traditional business model, and digitisation becoming an ever-present threat.
In the post-lockdown world, high-net-worth clients increasingly demand customised advice, whilst social distancing has challenged the traditional concepts of face-to-face communication. This means that relationships will be primarily digital in future.
Our 2018 wealth management report offered three conclusions: wealth management brands needed to re-discover their brand purpose; fully embrace digital; and then deliver flawless customer experiences with clients’ needs at the centre of every process. These conclusions now appear more relevant than ever.
A SHIFTING LANDSCAPE
Wealth managers face growing competition from several directions: Big Tech, FinTech start-ups, and also the major retail banks, who have rediscovered their appetite for wealth mnagement.
Over the last decade, the big retail banks such as Santander, Citi, HSBC and Lloyds have absorbed post-financial crisis regulatory reforms. They are now attracted to wealth mangement because of its long-term potential, and their high profile brands and deep pockets might realise attractive returns.
With its financial muscle and global reach, Big Tech has the potential to disrupt part or all of financial services. This shift is already well underway in China, while Amazon, Facebook, Google and Apple all have different plans for the sector, including wealth management.
Fintech start-ups have agility and innovation advantages, but they have struggled to build brand relationships with HNWIs. Their focus is therefore increasingly on mass affluent consumers, who are predominantly millennials and more open to “robo-advisors” and AI-bbased solutions. The potential for disruption remains, with asset and wealth managers in BigTech's cross-hairs.
So, what are incumbents doing about these threats? The list of innovators is short, with the notable exception of Marcus, Goldman Sachs’ challenger brand. Marcus signed up more than 250,000 UK customers in its first eight months, taking more than £6 billion in deposits until it temporarily stopped taking on more customers because of coronavirus. It now plans to offer wealth management services to the mass affluent on its new end-to-end digital platform, which will launch next year. This might be the 5am wake-up call for analogue wealth managers.
The lesson of this shifting landscape is clear - expect further defensive consolidation amongst incumbents.
THE TIME FOR DIGITALISATION IS NOW
The trend towards digital wealth management has been accelerated by the pandemic. Where digital tools or apps were once a luxury, they are now the essential touchpoints of the client experience. If these tools are sub-standard and brand experiences poor, brand equity is lost.
Finantix, a global technology services company, recently ran a survey that asked wealth managers the question “what would you do if you were CEO for the day?” 47% answered that they would prioritise the digital client experience. This reflects the prevailing view that many firms have not keeping pace with rapidly changing client needs and expectations.
Instead, many firms elected to build a thin digital layer around their service offering to give the illusion of being ‘digital’, whereas they really needed to be braver, and transform their business model from core banking platform to every user touchpoint.
From our work with Azqore, the private banking technology platform, we know that private banks and wealth managers are looking for end-to-end digital solutions – from onboarding and back office systems to continuous regulatory alignment and cash and portfolio management. But it’s not just about the tech, it’s also about the personalised brand experience and most wealth managers have simply not committed sufficient investment to designing and building world class digital experiences.
The pressure is on for wealth managers, regardless of size. The sector is now in a digital arms race.
THE ROLE OF BRANDING
Brands need to remain relevant and above reproach to maintain their brand reputations and ensure they are in tune with macroeconomic and societal trends. For wealth managers, this pandemic represents a tectonic shift that requires every firm to consider its strategy and ensure that their brand is still fit for purpose.
Before now, failure to differentiate has rarely been punished in a sector where most traditional private banks have delivered year-on-year profits in rising markets. Their brand values have hardly moved beyond the generic ‘client commitment’ and ‘unique investment philosophy’ and their online brand experiences trail high street banks.
BigTech brands, including Apple and Google have long set the standard for digital user experience, and consumers often have a stronger emotional engagement with these brands than with their financial services provider. The success of Marcus illustrates these principles – the brand puts the customer at the centre of an easy-to-use online experience, coupled with a highly competitive products, supported by a strong brand with a clear brand promise. Google Pay promises something similar, replacing high friction online banking experiences with a Google user experience, integrated into partnering US bank back-ends, avoiding any regulatory oversight, while still sharing the data…
If, at least for now, wealth managers’ greatest assets are still their brands, what are the core tenets of these brands? How relevant are they, today? What do they stand for apart from ‘finance’ or (analogue) ‘service’? And how relevant are they in today’s context of megatrends, such as digitisation, climate change, biotech, #blacklivesmatter and AI?
In the past wealth managers have relied on personal relationships between relationship managers and their ‘books’ of clients. Only a few brands truly transcend strong personal relationships, but that will inevitably change in an increasingly digital world. This will favour banks that can deliver exceptional user experiences to the new generation of high net worth clients.
BRAND POSITIONING
So how should wealth management brands position and differentiate themselves to achieve preference?
Positioning is about creating an intended brand image. It’s what you want your audiences to think about you, and only you. Sometimes it can be achieved by counterpointing competitors (think Apple vs Microsoft), but it can also be realised by building on your brand tenets and telling a powerful brand story that really rings true.
Differentiation isn’t possible without positioning and you can’t maintain a differentiated position without continuously investing in communicating a consistent proposition. Only a few wealth managers ‘get this’ but it’s especially important in any transformation from a one-to-one people business to a frictionless manager of financial (and non-financial) wealth.
In life after lockdown, with digital transformation changing many of the rules, branding and customer brand experiences have become crucial factors in determining who will be a wealth management consolidator, and who will be consolidated…
For information about our wealth management branding services please get in touch directly.
Peter Matthews
Nucleus Founder & CEO
July 2020
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