Navigating towards a 'next normal’ after COVID-19
Lessons from APAC wealth managers
The dramatic impact of COVID-19 on individuals, communities, and organizations is unfortunately still unfolding. No financial institution will be immune to its effects. Firms have taken rapid action to protect themselves, their employees and their clients, and are considering how to future-proof their business for a ‘post crisis’ world.
In response to financial market turmoil, trading activities increased significantly, peaking in mid-March 2020: the average weekly trading volumes of Hong Kong's Hang Seng Index, for instance, were up almost 80%, compared with the same period in the previous year. As a result, leading wealth managers reported strong Q1 2020 results (e.g., operating income: UBS Global Wealth Management +14%, Credit Suisse International Wealth Management +6%). However, going forward, wealth managers will be facing lower valuations of client portfolios, for many the primary driver of fee income.
Based on over 25 conversations with industry leaders in the APAC region, our study found that the wealth management business model has proved its resilience. However, we noted clear differences in the way APAC firms handled the crisis. Most wealth managers applied a somewhat traditional approach, many still partially working from the office and relying on conventional communication technologies. Investment managers, FinTechs and digital leaders, on the other hand, mostly enabled location independent ways of working through digital tools granting secure remote access for employees.
In a post-crisis ‘next normal’, new and reenforced client demands and priorities will emerge, with advisory excellence, the availability of hedging strategies, as well as the confidence in the operational resilience of a wealth manager becoming important factors. To enjoy a competitive advantage in a 'next normal', a more digitally enabled front office will be a key requirement. Most prioritize digitalization around client onboarding, while leaders also digitally support the traditional human elements of the client life cycle: prospecting and client advisory. In the long run, wealth managers will benefit significantly from efficiencies from increased digitalization – contributing to a much needed increase in profitability.
Overall, the global COVID-19 pandemic has not fundamentally altered the industry's strategic imperatives, but will further accelerate the difference between winning wealth managers that explore innovative edge business models, increase their operational agility and engage digitally with their clients – and other firms with a more reactive approach that may struggle increasingly in a wealth management industry that is bound to be even more competitive in a ‘next normal’.
Navigate the crisis, emerge stronger, and prepare for the next normal
To help global financial services leaders navigate the crisis, we have developed a COVID-19 framework consisting of three phases.
Wealth management is a relationship driven industry. But we need to build platforms and push digital channels, now more than ever.
Client executive, Global Wealth Manager (present across APAC)