Digital investing and the future of wealth management

Introduction

The wealth management sector is changing, and there’s no going back.

Over the next 5-10 years, we’ll witness the largest transfer of wealth in the history of mankind. More than $60 trillion in assets will be passed to a new generation, a group that’s a radical departure from those who came before. These investors have significantly higher digital expectations, as their entire lives have been shaped by technology, and they definitely won’t settle for “good enough.” But they also want the human touch — advisors who can give them personalized, data-driven guidance. And that means a hastily cobbled-together digital experience just won’t cut it.

That’s why it’s absolutely imperative that you’re prepared, so you can position yourself to take advantage of the opportunity. And make no mistake, it is an opportunity. But it’s also a threat, if you’re not able to adapt in time. 

As I explained at Backbase ENGAGE EMEA, you’ll need to create user-centric, tailored investment experiences that combine cutting-edge digital tech with the human touch. That’s a universal requirement. But don’t fall into the “one-size-fits-all” trap. You’ll need to segment your customers and leverage technology to build solutions specifically catered to them. For example, retail customers are focused on personalization and ways to achieve more with their money, whereas entrepreneurs and high-net-worth individuals expect a perfect blend between digital self-service and the human touch. That means you’ll need to automate and orchestrate more functionality in order to provide the services they need. 

Let’s take a quick look at these segments, so you can have an idea of how this can look in practice.

Retail investors vs. high-net-worth individuals

Retail customers want to start investing in their futures. They need a bank that makes it as easy as possible to invest their savings, guiding them to make the best possible decisions so they can reach their financial goals. You’ll also need to provide a diverse portfolio because these investors lack confidence and prefer to delegate to the real professionals. Catering to their needs is essential if you want to retain their business, because if you can’t give them the services they want, there’s a lot of challengers out there that can.

On the other hand, entrepreneurs have a wildly different set of problems to solve. They have excess cash lying around, and they want to put it to work. However, these investors also want quick access to their investments, in case their business needs the funds, and that means it's essential that you provide short-term, liquid investments. That’s a considerably more complex situation than the retail customers, but it’s still an achievable goal, with the right digital tech.

Unfortunately, knowing what you have to do doesn’t mean you’re ready to get started. First, you’ll need to rethink your operating model and update your legacy tech infrastructure. Let’s take a look at how you can make the leap to Engagement Banking — and how you stand to benefit from this paradigm shift.

The power of Engagement Banking

To put it simply, an Engagement Banking Platform is your chance to truly delight the new generation of investors. By leveraging a single-platform model, you’ll be ready to progressively modernize your banking stack, allowing you to gain freedom from your core. This will give you both short-term independence and long-term flexibility — making it a “low risk, high reward” approach to changing your core systems. And let’s not forget about scalability. With a platform, you’ll be able to plan for the future without worrying about whether your systems are up to the task.

The key to your digital transformation’s success? A composable platform fabric that allows you to create a product that not only meets the needs of specific sub-segments of your customer base, but that covers the entire wealth value stream. And even better, you’ll do it in a fraction of the normal time. That means even existing retail banks can add a new investing business line in months, not years.

And let’s not forget about the customer. To cater to the new generation of investors, you’ll need to put them at the heart of everything you do, and a platform is essential if you want to make this happen. This new model will help you build a complete solution that meets their every financial need, increasing retention, boosting happiness, and helping them reach their financial goals.

In the case of our retail customer, the sky's the limit with a platform model. You’ll be able to create an ESG-driven robo advisory product, automating the entire investment decision. And the best part? The same platform can help you build a product for your entrepreneurs, one that combines things like fund selector tools to choose short-term investments and cash-like investments that bring a bit more interest than the average.

In either case, by combining platform building blocks and out-of-the-box journeys, you’ll create a unique, tailored value proposition and bring it to life — with minimal time, cost, and risk. That’s the beauty of an Engagement Banking Platform. You don’t need to buy different platforms to cater to different segments. Instead, you can build out different value props on the same platform, then target your customers with a very specific proposition that solves all their investing headaches. And that’s what the future of wealth management looks like.