Transformation in wealth: why digitalization and purpose need each other

This is part 1 of a co-authored blog series with my colleague Mike Lee, EY Global Wealth & Asset Management Leader.

Last year, we blogged about how the wealth industry could use trust, data and hyper-personalization to build ecosystems that deliver outcome-focused services – reducing cost to serve and improving the wellness of society in the process.

That already feels like a lifetime ago. Devastating as it is, COVID-19 has been a super-catalyst for change in the industry. Development has accelerated, with transformations we expected to take years happening seemingly overnight, such as:

• A boom in digital adoption: In Hong Kong, Standard Chartered’s platform has seen mobile fund transactions triple; in the US, three leading brokers report an average 125% rise in online account openings and, in Singapore, 70% of OCBC’s private banking clients have signed up for digital services.
• A surge in demand for sustainable finance: An EY study shows that 98% of financial organizations expect the pandemic to increase demand for sustainable solutions and interest in a more holistic view of long-term value.

These changes are driving established providers and new entrants to double down on digital transformation. For example, since August, we’ve seen Singapore super-app Grab roll out a micro-investing product, and Franklin Templeton planning to collaborate with gaming specialist Razer to create a digital wealth platform for millennials.

True, there are obvious East-West differences in the speed of change. Asia stands out for digital adoption rates, and for consumers’ readiness to share personal data in exchange for tailored services. But the rest of the world is following. It’s hard to think of a time when the global wealth industry has undergone such a clear, sudden transformation.

In short, many of the predictions we made last year – such as the digital delivery of “wealth as a service” – are already happening, at least in some parts of the world. So if that’s where we are now, what comes next? And what’s beyond that?

In the immediate future, we can expect the changes we’ve already seen to be overtaken by further disruption, as new initiatives gain traction and innovation accelerates. Looking further ahead though, qualitative questions about the advance of technology remain to be answered. Are convenience, personalization and 24/7 access enough? What services should be provided, and how far should they extend beyond wealth into wellness? Does digital transformation always improve investors’ lives?

This therefore feels like a good moment to revisit our thinking about the future, and to ask ourselves how wealth firms should transform themselves for the post-COVID-19 world.

Let’s start by acknowledging the changed realities facing the industry. The time for proofs of concept is gone; value must be delivered. Firms need to engage digitally with their clients, or at least offer them digital options. Not only that; digitalization must deliver tangible improvements in experiences, while reducing risks and fixed costs. Technology needs to elevate firms’ ability to serve – while lowering their cost of doing so.

More broadly, wealth firms must understand the growing role of ecosystems in delivering outcomes to investors. And they need to ensure they’re creating long-term value, both by engaging with clients through the lens of sustainability and by delivering benefits to a wide range of stakeholders, including customers, shareholders, employees, regulators and society as a whole.

We therefore think there are two fundamental questions that all wealth firms, whether new or old, large or small, regional or global, must answer:

• First, where do we fit in the ecosystem? This is about deciding what role firms want to play. Are they the provider of products to support solutions or the platform? Do they own customer data or analyze it? It’s also about identifying the structures, both in-house and external, they need to fulfill their chosen role. Can they take a modular, flexible approach that allows them to work with a range of different players?
• Second, what is our purpose? Answering this requires more than well-intentioned statements about helping investors to achieve their goals. EY’s Future Consumer Index shows that customers want to work with companies that share their goals and back them up with action. Firms can and should ask themselves: What do we stand for? Why are we here? Each firm’s ability to be truly distinctive depends on understanding its DNA, and how it will help them to build trust with investors and serve broader stakeholder groups.

Of course, these are two sides of the coin. No organization can divorce “what we do” from “why we do it” for long without losing focus or being “called out” on social media. Understanding that symbiosis will allow firms to ensure that technological change serves their clients, staff, shareholders and society at large. In doing so, it will help them to further democratize the wealth industry and increase its accessibility.

It’s this purpose-led vision for digital transformation – combining digitalization with intent –that provides the framework for our new blog series. Over the next few months, we want to go further, exploring how firms can apply this concept in reality and what the drivers of success may be. More specifically, we plan to look at four key themes that we suspect will be central to every successful transformation in wealth over the coming years:

• Getting digitalization right – which means looking beyond speed and convenience
• Understanding that data is about people, trust and relationships, not just numbers
• Building ecosystems that can capture the magic of collaboration
• Improving wellbeing for more people, in more ways, than ever

In our next four blogs, we’ll use examples from the industry, as well as our own experience to dig into these in greater detail. We believe the firms which master these challenges will be best placed to put people at the heart of their thinking, genuinely differentiating themselves by answering the unspoken question: Why should you trust us to help you?

But what do you think? We’d love to hear from clients and colleagues as we develop our ideas – building a better working world in partnership with the whole wealth ecosystem.

The views reflected in this article are my own and do not necessarily reflect the views of the global EY organization or its member firms.