Over the past eighteen months, we’ve seen some of the biggest global players and mid-tier firms in wealth management announce major changes to their wealth strategies and operating models. The common theme? A partial or full merging of high-end private banking with lower-end mass-affluent businesses into a single much larger wealth management unit to deliver investment products and services to a broader range of clients across different wealth tiers. Select examples include HSBC appointing a new chief executive for its recently integrated Wealth and Personal Banking business¹ and UBS to target—besides its core high net worth clients—mass-affluent clients in a more digitally powered push beginning in the U.S. and spreading globally as outlined by the new CEO Ralph Hamers.²

With several other cross-financial services industry players now also wanting to double down on the affluent wealth segment, one could argue that a broader shift is underway. In this blog, I wanted to share a couple of thoughts around this development, especially on what I believe is driving it, how to succeed in this more competitive environment and why this could be a win-win situation for banks and clients alike.

Leverage new technologies to help scale interactions

From my point of view, this is a reaction to some developments across the wealth management industry overall. One, today there is an opportunity to help mass-affluent clients move money from low yielding accounts into higher yielding investment offerings. This could address their need for preserving capital in the light of the recent return of inflation. Another is the greater willingness of clients to now adopt remote virtual client-advisor financial interactions as an effect of the pandemic. A further factor is the impact of Fin-Tech innovators pioneering automated robo-advisor models with goals-based advice linked to suitable standard funds-based portfolios tracked for greater client transparency.

While all those factors work together, it is the rapid developments in new technologies including data analytics and artificial intelligence that now help firms to engage mass-affluent customers digitally at scale and better serve the rising number of younger first-time investors The combination of a broader use of new technologies with merging existing wealth and mass-affluent operations and client bases may present a way to respond strategically to the key developments mentioned above and tap into the next level of industry growth. But what would it take?

Potential benefits from merging wealth and mass-affluent businesses

In terms of products, merging the wealth and mass-affluent businesses would provide opportunities to offer innovative products and solutions to a considerably larger and more diverse client base. Firms could distribute these products via more cost effective and scalable next-generation investment product and solutions platforms. Leveraging highly integrated hybrid advisor and technology enabled self-service front ends, that could enhance personalized client interactions to drive differentiation, growth and economies of scale.

Meanwhile, in terms of back-office platforms, the creation of a unified broader wealth arm could provide a great opportunity to rethink and “cloudify” back-office platforms that then could in return deliver cost reductions and improve flexibility. Increasingly, a move to the cloud involves collaborating with an expanding ecosystem of partners to help provide the personalized experiences that clients want today. By better connecting with leaner, more standardized, automated hubs and in some cases, outsourced platforms, firms could become more flexible through ecosystem-type organizations, potentially with lower costs and scaling advantages.

The final business-critical piece of the new capabilities’ jigsaw? People, of course! In combination with any workforce changes triggered by the pandemic, wealth managers may have to review and potentially reshape their talent strategies to support a more consistent, integrated, and democratized approach to providing wealth services. They would also have to align with the shifts towards hybrid interaction models that offer an optimal blend of remote face-to-face engagement powered by the right combination of data insights and the evolution of new technologies to provide greater enablement both to advisors and clients. This could be done by leveraging applications such as advanced customer relationship management systems and modern automated financial planning tools.

Improving the financial literacy for a broader range of people

I have saved talking about clients until now. Why? Because merging a private wealth and mass affluent business would not only help a firm to take some higher value services—previously offered only to high-net-worth individuals–such as private assets and make versions of them available to a much larger cohort of clients. It could also create new opportunities to help the next generation of entrepreneurial, business and professional clients who usually start in a mass-affluent segment but whose wealth may grow rapidly to be identified and migrated more smoothly across a continuum of progressively higher-value services without the hassle of opening and closing different accounts.

Think for a moment about another beneficial effect that this might have: by serving a larger amount of people, it could help to educate and improve the currently less wealthy client’s financial literacy and grow their skills as more informed investors thus helping them to better meet their financial needs such as self-provision for retirement.

A  lot to play for–but it would need smart “retooling”

While there are significant opportunities from merging and aligning all wealth management activities, it also adds up to a massive challenge to retool existing legacy businesses. Especially from a technology perspective this could require a move away from traditional bespoke and fragmented technology applications and development methods, towards more agile approaches based on the use of critical new technologies combined with associated talent development and upskilling in key roles to maximize speed and flexibility of an organization.

Together with PIMFA, the UK wealth industry association, we are currently engaging with wealth management executives across Europe to understand how they think key industry opportunities and challenges could likely play out. The goal of our research is to discover where wealth managers expect to have to focus on to future proof their businesses, what strategies, leading technologies and capabilities are likely to be needed. Once available, this report will provide a clearer picture of what could drive future success. Watch out for this new piece of research in Spring 2022.

I hope you found this blog interesting and if you would like to discuss any aspect of it or our upcoming survey, then please do get in touch with me.