7 Action Points for Post-COVID Reality in Wealth Management

December 2, 2020
Wealth management

It’s been already a year since the COVID-19 pandemic started in Wuhan. After the initial shock caused by lockdowns and social distancing, the wealth management industry, including external asset managers, quickly adapted to the new conditions.

At the beginning, relationship managers  had to do mostly what their intuition told them – assure business continuity and contact their HNW clients. RMs’ actions were led by gut feeling rather than experience.

However, now, they’ve been in this situation for so long that they can already draw conclusions and prepare action plans. That’s why we asked external asset managers how COVID-19 has been impacting their business and what predictions they make for the next months.

Their responses lead to a conclusion that technology is the answer. Now, let’s translate their predictions into concrete actions that any external asset manager can take to become COVID-resistant.

COVID-19 Response Timeframe for Asset Managers

In June this year, McKinsey & Company issued a report on the impact of COVID-19 on Asian asset management. The figures the authors cited were region-specific, but they placed them in a general, world-wide pandemic context.

They split the COVID-19 response timeframe into 3 segments:

Each of them has diverse goals and thus—different technological steps should be taken.

Horizon 1: Ensure Business Continuity in the Crisis

In the next several months, we’ll still live in a pandemic reality. For those external asset managers that haven’t done it yet, it’ll be necessary to switch to the fully remote mode. To ensure smooth transition, they’ll have to pay attention to three key areas.

Friendly Remote Working Conditions

Social distancing made us work from home. Apart from setting up a proper home workstation, external asset managers should decide what communication channels to use. As their clients prefer face-to-face meetings, they should remember about video-conferencing tools. Also, it’s important to stick to 1-3 tools to avoid confusion and chaos.

It’s also important to stay connected with the rest of the team. As we don’t meet in the office these days, I recommend setting up daily stand-up calls and virtual coffees, drinks, lunches, etc.

Engaged Customers

To keep their clients engaged, external asset managers need to maintain regular digital communication. It’s especially important in the times of growing uncertainty when panic sets in easily. Video-conferences mentioned before are the most engaging online channel, so EAMs should use them as often as possible.

Remote Working Infrastructure

It’s not only about moving the communications to the online mode. External asset managers should also think about moving the work itself. Safe, virtual document storage combined with electronic signature software almost completely removes the need to meet face to face.

EAMs using Portfolio Management Systems should ask their PMS providers for storing their electronic documents. Some PMS solutions can even automate e-docs delivery from custodian banks, which significantly saves wealth managers’ time and reduce the amount of the paper they print.

WealthArc PMS has a set of features facilitating remote document management. You can read more about it in a blog post by Jakub Zowczak.

Horizon 2: Stabilize and Build Resilience

Once the worst is behind us and the pandemic calms down, external asset managers will have to stabilize their businesses. At this moment, tech investments will become crucial as they’ll build resistance for future unexpected events.

Upgrade IT Infrastructure to SaaS

Software-as-a-Service is an IT distribution model that gives external asset managers access to their data anywhere, anytime and from any device. When offices get closed unexpectedly, SaaS tools allow them to work on their home device without installing any applications on it.

SaaS popularity is constantly rising because such tools do not require on-premise servers or IT specialists maintaining them. EAMs may now use Office 365 for mailing and office tasks, Salesforce for CRM, and many more. Even more importantly, there are Portfolio Management Systems available in this model.

Growth by Customer Segment and Geography

Wealth Managers face many challenges resulting from rising client expectations (especially in terms if digitisation) or new regulations, and lockdown is making the to-do list even longer. How to ensure growth in such demanding environment?

As regulations vary depending on region, the easiest way to ensure compliance is segmenting clients by geography and preparing region-specific offers. M&A is also an option worth considering

It is also a good idea to segment clients by the profit they generate. After analyzing cost-to-income ratios, EAMs should redesign their offering for affluent, HNW and UHNW clients or in any other way justified in the light of their calculations. Here, technology might help to automated processes and offer more streamlined, yet still cost-efficient services.

Horizon 3: Prepare for the Next Post-COVID-19 Normal

Once business continuity is assured, external asset managers should think about the long-term perspective. That’s because some changes in our work that happened during the pandemic are likely to stay with us (with remote work as the best example).

Optimizing Digital Engagement

External asset managers shouldn’t stop after moving their operations to the cloud. Digital channels have a huge advantage over the physical ones: it’s much easier to measure and optimize them. Once an EAM gathers sufficient data on their customers’ and leads’ behaviour, they can modify their online channels to meet their customers’ needs better.

The first step should be adjusting their product offering based on the gathered data. Then, EAMs should proceed to optimizing their Client Portal to make it maximally user-friendly. Finally, they can apply AI to make their electronic system as personalized as possible and automate tedious manual tasks.

M&A and New Organization Setup

In the long-term, external asset managers should plan strategically. They should consider mergers and acquisitions, but only if there’s strategic rationale for them (e.g. EU or US compliance requirements).

When planning any kind of transitions in their company, EAMs should appoint a person—or a team—responsible for planning it and executing from A to Z. In such a case, it’s also important to rethink KPIs and incentives for employees as well as communicate the changes to the whole team.

We are entering a new age of wealth management. New technologies are the key.

Guillaume van Berchem, BVB & CIE

Technology as a Vaccine

The pandemic showed us that skilled use of technology makes us resistant to unexpected events. For external asset managers already using digital tools on a daily basis, the pandemic outbreak wasn’t an earthquake. Because of that, when we asked them how to prepare for the next unexpected, they mentioned technology as the best protection.

At WealthArc, we are committed to helping external asset managers transform digitally to stay on the top regardless of external factors. We regularly publish expert comments and articles that help them run their businesses in the uncertain world. To get live updates on new publications, join our LinkedIn community.