Over £20 billion of high net worth individuals’ investable wealth could be passed on to their loved ones every year, but as many as 80% of wealth manager’s don’t have an existing relationship with these beneficiaries.
Digitisation is key to addressing this challenge.
A new report from Nucoro, a B2B fintech providing Wealth Management as a Service solutions, says traditional wealth managers need to totally re-engineer their operations if they are to prosper in the future. However, it warns that on average around 84% of companies generally fail at digitisation projects.
The report entitled ‘The Future Challenges for Wealth Management’,says wealth managers and financial services companies in general need to prioritise and redefine what can be expected and achieved from digitisation, and make increased use of partnerships with expert solution providers.
Nucoro says the digitisation of the wealth management sector needs to go beyond simply moving physical into digital, and fundamentally rethink products from the conceptual to execution. It says this is being driven by the rise of automation facilitating scalable growth, and the transformation of customers where their expectations, needs, behaviours and demographics are changing.
To illustrate this point, Nucoro estimates that on average, for the next decade over £20 billion of high net worth individuals’ investible wealth will be passed on to their loved ones every year(1) , but as many as 80% of wealth manager’s don’t have an existing relationship with these beneficiaries.(2) Many of these beneficiaries will be millennials who make great use of technology in all aspects of their lives, including managing their finances.
Nikolai Hack, the COO and UK MD of Nucoro commented: “As with any investment in a financial business, a central motivation should be to ultimately produce outcomes that can benefit customers. Adopting bolt-on enhancements like digital customer experiences or automations for back office functions are the best routes to upgrading the services to existing and potential clients due to their accessibility, scalability and affordability.”
“Wealth managers must embrace technology. The industry is heavily regulated, and it therefore faces a large administrative burden, but technology can minimise the time and resources spent on tasks that are very basic but high in volume.”
The report highlights several key trends that innovative wealth managers need to address if they are to be successful in the future:
The growth of digital wealth management:
The report says it is now realistic to consider direct to consumer robo-platforms as legitimate industry challengers. By the end of 2018, they were managing $257 billion, and this could grow to $1.26 trillion by 2023(3)
The rise of fintech new entrants:
While tradition still reigns supreme in wealth management, there are major indications that the next decade will see technology driven services enjoy strong growth. Taking an example from another industry, looking at the banking and payments market in Europe – new entrants (including challenger banks, nonbank payment institutions and big tech companies) that entered the market after 2005 now amass up to one third of new revenue, despite only taking 7% of the overall revenue.(4)
Growing advice gap:
The cost of financial advice is demonstrably pricing out large sections of potential clients. A report in 2018 found that more than 40% of financial advisers have been forced to review their charging structures in the first half of 2019 (5). This is a huge threat and opportunity for wealth managers Platforum
Wealth passed on to millennials/changing client needs
Beginning around 2030, an estimated $4 trillion of wealth is going to be passed on to millennials in the UK and North America from their parents. (6) However, only some 20% of UK advisers currently have an existing relationship with their current clients’ beneficiaries, many of whom are millennials. (6) This means that digital and mobile first access will become more universal as the younger generations mature. Digital finance is a highly effective engagement tool for younger generations.
Nikolai Hack said: “An unprecedented transfer of wealth is expected to be served by a shrinking pool of advisers. They will be dealing with a client base that is likely to need them to become more flexible and deliver a more modern and personal service.”
“This could mean more agile tech-driven firms will need to fill the gap. Alternatively, the existing firms could push to streamline their operational functions and manage overheads – cost cutting essentially – while handling an influx of orphaned clients at the same time.”
“For the next generation, their needs and expectations are centred on interacting with their finances via digitally accessible platforms that link their money, their everyday lives and their goals to the future. Greater customisation of service levels will also be key here.”
The reach of regulation
The number of individual regulatory changes that regulated organisations must track on a global scale has more than tripled since 2011. (7) Tech can play a key role in helping wealth managers with this area of their business.
Nikolai Hack said: “For wealth managers, technology and digitisation can be applied across all functions, from onboarding clients and portfolio management to operations and reporting. It also enables wealth managers to become much more agile and focused on the needs of clients. However, wealth managers need to find the right balance between digital and human services and the key to success will be how wealth managers combine these two in order to meet the challenges now and in the future.”
From client onboarding to portfolio construction through to billing automations, Nucoro combines all the tools required to build the next generation of wealth management propositions. To help the wealth management sector move forward, Nucoro offers a new technology-based foundation built without legacies - a complete overhaul to the models of client service and accessibility. Nucoro’s is a radically different approach to the relationship between technology providers and the organisations adopting their solutions – in short, they can provide the new engine to power the next generation of financial services.
Whilst Nucoro has recently launched to the public, the technology behind it powers the retail investment platform, Exo Investing – a fully automated, AI-powered wealth management platform. Within the first year of operation, Exo won two industry awards (Best digital wealth manager OTY + Industry Innovator OTY at the AltFi awards 2018), was named as a finalist in three more and selected to two disruptive company annual indexes (Wealthtech 100 and Disruption50’s 100 most disruptive UK companies).
Nucoro is making this technology available for businesses in the wealth management sector that have the ambition to truly innovate and future-proof their businesses - and are struggling to realise their digital ambitions alone.
Notes to editors:
For further information please contact Phil Anderson or Will Easton at Citigate Dewe Rogerson on 0207 025 6494/0207 025 6518
- Based on Nucoro analysis of Global Data Research
- Based on Nucoro analysis of Octopus Investments research
- Aite Group Research
- Royal Bank of Canada
- Boston Consulting Group
This is Wealth Management as a Service, empowering businesses to build and scale the financial services of the future.
The Nucoro Wealth Engine, the core of their technology, combines all the necessary tools to build wealth management propositions, from client onboarding to portfolio construction through to billing.
Nucoro partners with banks, wealth managers, IFAs, insurance providers and other financial services businesses. They work with those who want to be more agile, efficient and innovative than they ever could before, and rethink what's possible in the future.
In May 2018, they launched an investment platform, the first of its kind as a fully AI-powered wealth manager. Sitting behind the award-winning platform, the Nucoro Wealth Engine allowed every client’s portfolio to be completely unique, built around their goals, and managed daily for a fixed, low-cost fee. After only a year, Exo Investing has already won two industry awards, selected as one of the UK’s most disruptive companies in two different indexes and named a finalist in two outstanding technology platform offerings.
The Nucoro Wealth Engine enables radically different investment and saving propositions in a range of sectors.
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Automated suitability assessment, KYC checks, client and regulatory reporting
Freely configurable asset universe and portfolio management
Financial planning and reporting apps for clients, advisors and management
Insurance, Banking & Asset Management
Bespoke digital savings and investment propositions, fully integrated or standalone
End-to-end automation of front, middle and back-office functions
Custom product universes and digital experiences for clients, advisors and management