Wealth Management Industry – From Global Financial Crisis to COVID-19 and Beyond

Global Financial Crisis

The 2008 global financial crisis represented a pivotal moment in the financial industry, marked by proliferation of startups and the emergence of new players from e-commerce and information technology that have fragmented the financial services market. Enabled by high levels of smartphone penetration, broadband access and developed sophistication in application programming interfaces, these startups and technology firms have challenged established financial institutions by offering specific niche services to consumers, businesses, and incumbent firms. Prior to 2020, Wealth Managers have showcased little consistency in digital use case prioritization and implementation. The existing advice delivery model has proved somewhat resilient, but its limitations have also been exposed. The industry’s technological capabilities were immature relative to other financial services providers, especially in comparison to retail banks, where, since the global financial crisis, digital capabilities improvement has been driven by evolving client expectations and a strong need to reduce cost-to-serve to protect profitability. Large bank-owned Wealth Managers have found greater success leveraging channel upgrades made over recent years, while smaller independent Wealth Managers have had more difficulty managing client engagement due to a lack of remote working protocols and digital client engagement infrastructure. Simply put, Wealth Managers have not experienced similar levels of urgency. As a result, their digital offerings were less developed.  Self-serve channels like self-directed trading and portfolio monitoring have helped to pick up the slack but have often lacked the appropriate functionality to be fully effective.


Since 2008, emerging players have expanded their scope and are now covering a full spectrum of services such as finance and investments, internal operations and risk management, payments, infrastructure, data security, monetization, and consumer interfaces. This trend gave way to new competitive patterns in an already crowded industry. There is now a myriad of tech companies, both emerging and established, who specialize in various algorithms, data-sets and analytical solutions, cloud-based collaboration, natural language processing and generating tools catering to the financial services companies. The industry has also seen an emergence of Millennials as a new investor class. The recent unusual trading activity in Gamestop stock, which was triggered by messages on a social media discussion board, has underscored the Millennials as a force to be reckoned with, having disrupted CX expectations in many industries including the financial services. Millennials are comfortable in conducting their own research, including nonfinancial resources such as Google, Facebook, Twitter, Reddit, etc. and they expect to have access to service including financial advice, anywhere and at any time through multiple devices and channels as part of a cohesive digital experience. The Gamestop drama has also created a watershed moment for DaaS as Wall Street firms are now getting ready to spend big money on tools that will enable them to monitor and process discussions on message boards like Reddit. The shift in consumer expectations has also disrupted traditional business models. Insurance and retirement providers are now moving to financial planning and wealth management, and banks are investing heavily in digital wealth management capabilities. 


It has been nearly a decade since Betterment and Wealthfront ushered in digital advice with hopes to gain market share by targeting younger, emerging affluent investors. What began as a nascent category of start-ups with a couple of hundred billion dollars under managements, focused on optimizing investment portfolios and offering free online trading has now become comprehensive personal-finance platforms, with additional products and tools, and the ability to talk with a human advisors and nearly $1 trillion under management.


COVID-19 has fundamentally changed the Wealth Management industry and the way Wealth Managers deliver advice and serve their clients.  With 2020 precipitating a forced transition to new remote ways of working and required advice to be delivered through multiple channels, Wealth Management companies have ramped up their digitization efforts and began to dedicate significant efforts to the development of compelling digital experiences for investors as well as their advisors, recognizing that advisor and client experiences are not independent, and that they should support and reinforce each other, aided by seamless integration. In 2020, video conferencing has become a growing medium to conduct frequent check-ins with advisors, to deliver webinars and client presentations. The usage of phone calls and emails has decreased as live chat, website, and app services grow in sophistication and functionality, and clients increasingly use these self-serve channels to monitor portfolios and valuations, to conduct simple transactions, or to receive technical support. While the human relationship management and face-to-face interactions will remain crucial for building trusted relationships and to delivering a strong Wealth Management experience, there will be a step change as clients emerge from the pandemic with their muscle memory for digital and remote interactions intact, with many recognizing and preferring the convenience of remote channels for routine business.

Beyond 2020

As the digital propensity continues to rise, retail investors increasingly view experience, rather than product offerings, as the differentiating factor for wealth management firms. Within the next couple of years, data analytics, cloud, mobile, and social media will become utility technologies for investment firms.  A cloud-based platform makes it easier for firms to harness new technologies, such as blockchain, robotics, artificial intelligence, and APIs. Some firms have already begun using data gathered from a variety of internal and external sources including social media in order to put together a picture of their clients and prospective clients for use in marketing and to improve the advice they are offering. Most wealth and asset management firms are at the earliest stages in their use of AI. And although blockchain is best known as the operating system behind Bitcoin, investment providers see many other applications for the technology such as smart contracts, better customer data, faster payments, and greater transparency with full-service banks leading the way by either having already piloted or actively planning to use blockchain over the next couple of years. And while AI and blockchain may be the fastest growing technologies, others are also on the rise including facial recognition software for client onboarding, augmented and virtual reality for conducting virtual client meetings. Yet the industry has only seen the beginning of exponential technologies such as robotics, cognitive computing and distributed ledgers applied to wealth management and there is much work to be done before fully scalable, digitally enabled WM platforms become reality.