Publications & Thought Leadership
Digital Convenience in Wealth Management – Driving an Innovative and Personalised Client Experience
Karsten Kemna of CREALOGIX
Apr 22, 2021
Hubbis, in partnership with Swiss FinTech CREALOGIX, held a private ‘virtual’ thought-leadership discussion on Wednesday 17th March attended by around 20 leading private bankers, consultants, digital platforms and wealth management firms to discuss how the incumbent players in Asia can adapt their business models and their digital transformation journeys to ensure they compete with their peers and are ready to fend off new entrants, such as new digital wealth platforms and the BigTechs. This is especially important as the younger generations in Asia either make new wealth or inherit large fortunes, and also as more and more women control more of the region’s wealth. The event was led by both the Hubbis CEO and Founder, Michael Stanhope and the CREALOGIX Managing Director for Asia Pacific, Karsten Kemna, who took the reins in April last year to drive the strategic development of the firm in the region. The attendees offered their insights behind ‘virtual’ closed doors, with all comments off-the-record. The free-flowing discussion generated some significant and valuable perspectives for attendees and Hubbis offers this review of the discussion here as a guide for our readers.
Key Observations & Insights in Brief
Wealth and demographics in Asia are shifting
Asia’s vast private wealth accumulation might have been slowed by the pandemic, but the dynamics of the region are still intact. More of this enormous wealth is transitioning to the second generation and beyond, while at the same time more and more wealth is held by women, and everyone is both more digitally savvy and more focused on issues around sustainability.
New expectations require new approaches
The wealth management industry must understand these changes, react and adapt, to ensure that they retain their relationships across the generations, as Asia’s elders and founder generations pass on their wealth. The optimal approach today is the hybrid model, aligning smart digital transformation and excellence with the right levels of human advice and service, with advisors empowered to be both reactive at speed and also proactive in delivering relevant products and solutions.
Watch out for the BigTechs, weaponised with data and USXpertise
The incumbent players in the region’s wealth markets must be fleet of foot and recognise that the BigTech companies have a huge advantage in ‘owning’ the data of individuals and also in their ability to achieve immensely personalised solutions and customer experience. If they choose to go headlong into wealth management, many seemingly sturdy ships could be capsized in the storms.
Make the client feel unique
Hyper-personalisation is a term that is widely used, but in the wealth management industry it is still a distant goal. The mission is to leverage digital solutions covering AI, machine learning, data and data analytics to deliver products, services and a USX that combine to make clients feel unique, thereby opening and/or boosting the relationship.
Aligning seamless communication with ease of access and simplicity of use
Many believe the wealth industry should be striving towards delivering their private clients with the simplest, most effective and comprehensive delivery of the entire wealth management lifecycle, from digital onboarding and KYC, to customisation of products and ideas with relevance driven by data and analytics, open architecture, ease of executing transactions and top-flight portfolio management and other reporting. If this can all be embedded within the wealth management equivalent of a chat app, this will be a real achievement.
Digital is here to stay
Bankers and other experts from across the region reported that they are convinced that the road to digitalisation will see no U-turns for clients or for wealth industry players. The pandemic has simply fast-tracked the evolution, but the direction remains the same.
Private clients in Asia are adopting technology, and they want more…
Industry experts also said that not only was digital adoption natural in younger clients, but it is also far more widespread and acceptable than might have been expected amongst first and second generations. Once adopted, there is clear evidence that each new service, product or tweak made by incumbents results in more adoption and ultimately more business.
There is perhaps a five-year window for transformation
A private bank leader from Singapore estimated that within the next five years, wealth and control of wealth would have shifted so significantly from the oldest to the second and third generations that the wealth management industry must, within that time, have completed much or most of their ‘smart’ digital transformation. There is a window to achieve this, but time is of the essence.
Leveraging the client universe
To achieve the goals of client retention and incremental business, those clients must be confident in the solutions and delivery from providers. The more personalised and bespoke the offering, the better the delivery and solutions. And the more the providers can leverage client activity through data, AI, ML and ultimately relevance, the better.
Each incremental gain is part of a much bigger win
Rome was not built in a day and each journey starts with a step. A guest highlighted that, for example, something as simple as proactively offering clients loans in certain currencies to boost trading in certain overseas markets and assets (activity that they can easily track from client behaviour) can build client engagement and activity.
The democratisation of wealth management is happening across Asia
The rising tide of wealth amongst Asia’s growing middle classes offers an incredible opportunity for incumbent players. In Indonesia, for example, a guest reported that investor numbers had surged 60% in 2020, albeit from a low base, and that some 70% or more of the investors are below 40 years of age. Digital is the only way to offer broad access to the universe of investments to this rapidly expanding demographic; then it is simply a question of how much of a human touch providers offer clients alongside their chosen digital interface.
But the journey to digital excellence is far from over
Whatever the vision of the digitised wealth management offering of the future is, a senior banker from Hong Kong pointed out that to achieve all the goals they would like contained within their digital interface, and to achieve it all seamlessly and compliantly, remains a real challenge. The journey, he said, is still ongoing and there are continual and often unexpected challenges along the way.
Lower margins to be countered by greater volume
Margins are falling in wealth management in Asia and have been for some years due to competitive forces and regulation, so the only way to fight back is to boost volumes and enhance advisory and discretionary revenues amongst higher net worth clients.
Knowing your market segment is essential for success
A guest said that in order to develop their successful digital wealth management enterprise in Singapore and Hong Kong, which launched a few years ago, they have stuck to a rigorous focus on target clients – i.e., those between the mass affluent and HNWIs who were underserved and needed a slicker offering.
Pure digital does not need to exclude the ‘human touch’
The same guest also remarked that although their offering was a ‘pure digital’ robo advisory platform, they do not label themselves ‘robo advisory’ and learned early on that 24/7 human--to-human customer service was essential for success.
Learn from your clients and ask for plenty of feedback
BigTechs are the experts in this area – obtaining feedback from their customers in order to refine their offerings. So too in the wealth industry, it is essential to appropriately survey clients to see where the wealth offering can be refined, where it excels and where it can be enhanced and how.
The Asian wealth management industry needs to fully embrace sustainability and ESG
As the demographics of the market shift inexorably, an ESG offering should not simply be in the products the banks and other firms offer; it should be adopted throughout the organisation in order to align with the future client base. It requires a total mindset change.
It is all about creating and adding value in order to drive businesses forward
It is fair to say that none of the incumbents in the wealth industry are there for philanthropic reasons . The common theme throughout the discussion was that the competitors in the market today see the need to significantly enhance the client offering in order to drive revenues and fend off new entrants.
The Discussion
Opening Remarks from CREALOGIX
Karsten Kemna is Managing Director for CREALOGIX in Asia Pacific, based in Singapore. He opened the event by introducing himself, explaining that the objective was to listen to the experts’ views and to offer some pointers as to where the firm thinks the wealth management industry is heading, as well as to highlight some changes and new trends that the firm sees from evolving in the global and also the Asian markets.
“I have been here around 15 years,” he told the delegates, “and previously helped a variety of roles in the banking industry. My colleague Jovin Shen, Senior Partner Manager here with us today, also comes from the wealth management industry. Together, I hope we can learn a lot from you all today to understand more of your interests, pain points and strategies going forward, and of course in relation to your competitive position and the role of digital solutions.”
Asia – wealth in transition
And with that, he zoomed in on a brief, 6-page PDF presentation to set the scene.
The presentation was titled ‘The Great Wealth Transfer’ and first highlighted how ESG and Impact Investing are both high priorities amongst the younger demographics, and how HNWIs and mass affluent clients of 40 years old or younger are increasingly dominating the wealth industry, along with more and more women who are either creating, taking control of or inheriting more and more of Asia’s vast wealth.
Talking through the slides, he noted how over the last several years, there had been a lot of transformation taking place in the wealth market, one of which involves the rising importance of ESG and impact investing.
Aligning wealth and principles
“There is today a far greater focus on combining profitability, growth and sustainability, and then making sure investments are in line with your lifestyle,” he explained. “As we see that so much wealth is actually moving into younger generations, people in their 30s and 40s that perhaps have made a lot of money in start-ups or perhaps taking over the family businesses, these younger clients are likely to want a totally different approach from a wealth perspective than perhaps their parents, and especially with regards to digital services and having the right ‘hybrid’ approach between digital and personal.”
“Meanwhile,” he added, “females also tend to take a different investment approach from male clients and have different expectations. And I am by the way pleased to see that we have a strong representation of women leaders participating today.”
Beware the threats
He then pointed to the threats to the incumbent WM players in the region, especially in the form of FinTechs and BigTechs, the latter really becoming more and more of a realistic threat.
“GAFA, or Google, Amazon, Facebook, and Apple, are all moving into banking services, payment services, being part of some of the new virtual banks in Asia-Pacific,” he reported. “Accordingly, they would have already a distinct advantage of owning all the data, so they would be able to really have personalised approaches to customers. In many instances, these players are also considered as more flexible and more customer-oriented than the traditional banks, so what they can offer is definitely a threat for the traditional banks in the industry.”
Making the offering unique and seamless
He pointed to the strategic imperative towards personalisation, even what he termed hyper-personalisation. “This ensures the customer feels really unique and then feels that he has end-to-end experience with his bank that is not comparable to any other. From the banks’ perspectives, they can anticipate needs, anticipate market trends, how those then reflect on the end customer and then leverage AI and Big Data to deliver something that makes these clients feel truly unique already from an early age. If they use the different solutions on offer from hyper-personalisation, they will start to become loyal and build up the relationship with you, the financial institution.”
He then briefly commented on how we nowadays increasingly use chat apps such as WhatsApp, Line, Telegram and others. “So, thinking about those conversational apps, how can you embed an end-to-end process within your banking app, so that you are able to securely conduct an entire process for a new customer, from onboarding and KYC, all the way through the transactions, confirmations, e-signature contracts and reporting, all at the same time conducting discussions and information exchange between the RMs and the clients?” he pondered. And that, in a nutshell, is what is known as conversational banking.
Views from the Wealth Industry Ambassadors
Hubbis: Have digital capabilities really become a key differentiator for private banks today?
A senior banker from Singapore addressed this issue, stating that digitalisation is incredibly important, and especially so amidst the pandemic where so many clients are at home, including the elderly who are ever more familiar with digital solutions. “We can see they expect more from the financial institutions serving them,” he observed. “We have a secure process to interface with the clients for account opening, transactions, portfolio reviews, up to date valuations of the portfolios across asset classes, easy communication with the bankers, and all of course entirely confidential.”
He added that within the next month, the bank would further build this out for clients to trade across markets including Hong Kong, Singapore, the US, Canada and London and Frankfurt, and that further development is underway to expedite forex trading. “This is all vital as we also see the rise of the digital platforms such as etoro, Saxo Markets and others,” which clients are increasingly comfortable with,” he said.
A five-year window?
He added that the banks have a window of perhaps three to five years while much of the really big money held by the very conservative older generation sticks with the banks, rather than moving to what might be considered riskier new entrants.
Another top banker in Singapore offered their insights. “What we think is really vital is for clients to be able to see and monitor their portfolios, as that engenders confidence and trust, and they feel in control,” they commented. “As a bank, what we are doing now is really leveraging what clients have with the bank, leveraging data, client behaviour, and driving insights that are highly relevant to them.”
Incremental gains
She offered the example of a client with an outstanding Aussie Dollar loan, or perhaps someone heavily invested in Australian stocks, whereby the bank can directly, even without RM involvement, offer Australian dollar finance to that client. “Another example might be to be proactive, so we can keep them informed about potential blind spots,” she added. “All this really is aimed at building the engagement as well as the trust that we continue to have with the client.”
Hubbis: How are you connecting to the nextgens and rolling out digital architecture to attract or retain them as clients?
A senior banker from the Philippines took this question, explaining that his bank had been expanding the digital architecture for investments for private clients, adding that digital engagement is no longer a luxury; it is a necessity. “To achieve the goals we set, firstly, we are making sure clients have seamless digital access, with exciting access points, and then we are providing new products and services.”
Huge spend on digitisation
A technology transformation consultant servicing the Asia Pacific wealth and asset management offered his insights. “We are witnessing a massive spend around wealth and digitalisation in Asia, and we are all lucky to be involved in this space right now. I want to address a couple of issues. One is hyper-personalisation, perhaps the most overused word we have in the industry, as the experience thus far is often far from being hyper-personalised. When we look at where our financial sector clients are spending right now, conversational banking absolutely resonates with many of them, and that we are clearly moving from the web to the app, as well as digital intermediaries, so we have seen proof of concepts being built around Alexa, or other chatbots.”
Being relevant
But he remarked that the feedback from the end customers is for more relevant insights rather than the somewhat generic insights the banks have been delivering thus far. And he cautioned that the upper end of the private banking world requires elevated experiences from the retail market, but to achieve that, there remains much work to be done. Regarding conversational banking, there is a lot of work being done to leverage the chat apps for private wealth, making a more seamless and accessible delivery of tailored and insightful advice, but there is still much progress to be achieved.
A banker from Indonesia added his perspectives, reporting that the bank had launched the first wealth management app in the country some 18 months ago. “Adoption of the app has been increasing all along, and then, when we add new features, we see the correlation,” he said. “Our objective here is to democratise the wealth management, through to the HNW clients too. Indonesia saw the biggest growth in the number of domestic investors in 2020, growing a remarkable 60%, and today some 70% of investors in the country are below the age of 40.”
Rising digital adoption
The Asia Pacific leader of a major global investment platform offered his views, from a different lens, as he deals with the wealth management providers covering private banking and the mass affluent market across Hong Kong and Singapore. He said that some of the private banks and others suffered initially from the remote working requirements when the virus hit, whereas the digital platforms and brokers were already well ahead, causing difficulties for the private banks and others as investors ratcheted up their activity from mid-2020 onwards. “We certainly saw account openings were pretty high across the clients that we spoke to,” he explained, “and that points to the greater take-up of online investments. And as to what they were buying, single stock trading was very popular, but there has been a shift towards people buying portfolio-based solutions online.”
A Hong Kong-based banker for a Chinese banking giant offered some views from their focus on the mass affluent segment, primarily geared for Mainland Chinese customers.
A long journey to excellence
“I have three comments,” they said. “With the mass affluent, one of our key challenges is always the RM to customer ratio. So, over the course of last year, we definitely saw COVID-19 being an external factor that drove customers’ self-directed behaviour and their keen desire to be able to trade and transact. We already have a pretty sophisticated stock trading app and an app that provides nearly all products which can be traded on the mobile phone. Although one of the challenges that we are still trying to crack is the simplicity of actually transacting wealth management products on the phone and while meeting the compliance measures, to be able to go through all those suitability assessments, the risk assessments is really a challenge. So, we are on this continuous journey trying to figure this out.”
The second observation was that offshore Chinese customers have high expectations for online banking or mobile banking. “They are very digital savvy,” this banker reported. “They expect very high standards, and for a bank in Hong Kong to be successfully serving remote customers with authentications and at speed, these are all factors that we are still in the process of improving.”
Boosted by fear of new entrants
She explained that for a brand-new customer, they could open the account totally online, taking a photograph of the ID, doing a real person check, and then filling in the information, and that had been in place for almost three years. The facilities also offer online credit card applications and processing, 24/7 fixed deposits, stocks, funds, and FX trading and others. “When you think of the virtual banks opening for business in Hong Kong, I would say that that was also a positive boost propelling us to all this progress in Hong Kong,” they remarked.
Driving business growth
Jovin Shen of CREALOGIX then offered his view of the discussion thus far. “Thanks to all those attending and for these insights. I see a consensus from the guests, with these incumbent players all trying to create value through digital connections and touchpoints. I describe this as earning the right to your clients’ attention. To state it plainly, these customers want to sell more product, but by making it easy for the end clients, and to achieve that, you need to earn the right with those end clients, and for that, they need trust in you.”
Hubbis: What drove your organisations to really focus on digital transformation, so was it the complaints from clients or more the opportunity you saw ahead?
“Competition has intensified,” said the banker from Jakarta. “They include now also the e-commerce or the start-ups that are currently entering the Indonesian market, and the rising competition has also helped drive investor number higher, as I mentioned, grew by 60%. Secondly, demographics are shifting, with more of the second generation the decision-makers now, and they are more tech-savvy. And of course, as I said, the customers are younger, with 70% plus of investors under 40. Thirdly, clients are most demanding, margins are getting squeezed, so the only way to counter that is to grow the number of customers, so less margin but more volume. Additionally, risk management performance is more robust, which is also driving change and helping shape the path of our exciting digital journey in wealth management.
A platform for success
The head of a well-known digital wealth platform in Asia then spoke, offering insights into their development over the past four-plus years. “We are the first such digital wealth manager to accumulate over USD1 billion of AUM,” they reported. “We have grown more than three-fold in the past year, which is really encouraging. But how do we build the all-digital experience and win clients without the backing of a very strong bank? The identification of the key customer segment – for us the mass affluent and professionals – is essential as a first step. We saw that gap, which is not served by private banks, but we also saw that they need more sophisticated investment products than they were being offered generally.”
Building the brand, building awareness
This same expert explained that they regularly visit companies, offer a lot of education and then set about building the client trust, proving essentially that their mission is ultimately aligned with the client interests and expectations.
“We set a mission from day one of helping our clients to build wealth over the long term. We do this through offering a very simple to use mobile app and web app, and then we also make sure that the investment products are low cost, and the fees are transparent. We have a range of investments actually quite comparable to what an institutional investor or private bank client could get at a much higher price and at a much higher barrier, as we can offer digitally. That has all helped build client trust and also a significant client base in a very short time.”
Keeping the ‘human’ element in the pure digital model
This guest also explained that although they operate in a category which is traditionally called robo-advisory, the firm has tried to stay away from that label because ultimately, even though a pure digital player, they said many of their interactions with clients are still significantly human enabled.
“We try to provide a superior customer support experience to our clients by offering a 24/7 customer service, with a pledge to pick up the phone like WhatsApp so clients can actually reach us or a human being in various channels that they prefer anytime, anywhere. That has been a very, very important lesson for us as well, to keep that human touch despite being a pure digital channel.”
Hubbis: How do you approach client loyalty, develop new products based on what is working or not working, and how do you improve connectivity around these areas with clients?
A senior banker with a state-of-the-art digital investment management offering fielded this question. “It is not rocket science,” they reported, “as it is really about how we obtain first-hand feedback from clients. On the app, via internet banking, before they log out, we ask you for feedback, for a rating, for views, for what did or did not work for them. But of course, that is really the tip of the iceberg because what is important for me is to really get a sense of what clients are asking for. So, we take a more structured approach as well through client surveys, through feedback from the RMs right, so clients let us know openly what new features they want. And there are times where we would just invite some clients to connect directly with us, tell us how they use the platform and offer feedback, this might be ‘virtual’ in lockdown or face to face if not. In short, we are really going through in depth to understand what clients are really looking at and looking for.”
Karsten Kemna: With the pandemic still in full force, but with the vaccination programme hopefully yielding good results, we might get back to some normality by next year. So in the next 6 to 12 months, what do you experts think will happen and then after that will impetus for the digital journey wear off as old habits, and practices return?
The senior banker from Manila addressed this, reporting that the corner had already been turned, that the digital tide was being surfed by a much more willing customer base who are enjoying the evolution, albeit forced upon them initially.
“Adoption and use of our app are up some 600% in the past year,” he reported, “and it is no longer just people in their 20s or 30s, it is senior citizens as well, and they are happily using the app. Moreover, they might if asked say they have no intention of seeing us again, face to face, that they're happier transacting online.”
Broad-based digital adoption and the hybrid model
However, he said that the future would likely remain a hybrid model, with some clients shifting towards that total digital mechanism, but with the bank integrating the human connectivity for other clients. “Some will want to handhold, we must be flexible, but for sure, the digital floodgates have been opened.”
Another guest agreed, commenting that what had happened was an acceleration of a phenomenon already starting to take place, and that a rising number of FinTech or BigTech companies are ever more avidly thinking through how they can basically leverage the scale that they have to provide wealth and advisory offerings.
The wealth and asset management consultant who spoke earlier offered his perspective, based on new research the firm was conducting worldwide. “I will offer a slightly different view, and that is around the sustainability and ESG issues that Karsten mentioned right at the start today. When we talk about the post-COVID landscape, and the whole build back factor, and we're seeing this across the whole of financial services, these issues and their importance are becoming very, very clear.”
Sustaining the future
He said that as sustainability is indeed becoming more and more important, there are more and more client discussions around how to adjust the product shelf and the delivery to support sustainability, on how to create and sustain value in the organisation as well, on how closely the clients’ own personal interests and preferences are taken into account when banks and firms provide their services.
He also concurred that digital familiarity keeps rising but that there remains a need for the hybrid solution. “But we also see continuing focus on the cost to serve, and that it is not viable to hire numerous RMs to service the rising middle classes in Asia, so technology must support and complement that process of democratising the wealth model, spreading it down to the mass affluent and retail segments, but with the digital and human delivery both aligned and well-curated.”
Hubbis: Sustainability and ESG have been highlighted as central to the future in the world of wealth management we inhabit. Why and how?
Amongst the wealth second generations of these wealthy families, they have the money and wherewithal to focus on more lofty and noble ideals than simply making more money, said one guest. And this is true also of the wealthy younger generations. Accordingly, one banker pointed to how the bank is trying to connect with them on this front, to engage them in activities and events around the whole initiative of ESG.
“In Singapore,” he remarked, “we need to go carbon neutral 2030-2035, so we are, for example, helping by focusing on promoting green bonds, and the underlying projects. We are actively promoting the solar panels to be installed at homes and offices and giving them very attractive terms. And we now offer ESG ratings on all investment products on the platform so the client can discern between what they want and what they don't want in terms of their preference, and help support their drive to sustainability and their ESG initiatives.”
Another senior banker from Singapore agreed, noting that the bank had raised sizable sums in ESG related funds and that there is a role to play digitally with ESG ratings and their delivery and also in how the bank can offer more theme-based ideas, products and content.
Closing Remarks
Karsten Kemna drew the discussion to a close with a warm thanks to all the guests for their excellent insights and to Hubbis for organising and chairing the event. “It has been excellent to hear from your experts in the market,” he said, and we learned a lot from your views and outlook for the future. I still believe we are at an early stage of this journey, and I can imagine that another year on, we will all have advanced even further. We hope that we at CREALOGIX can play a role in this journey, and our door is open to you all at any time.”
Managing Director Asia Pacific at CREALOGIX
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