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The digital wealth manager of the future

The wheel of change is turning on the wealth management industry

It is a fascinating time to work in digital wealth management (WM), a time of great challenges and great opportunities. The WM industry today is certainly under considerable stress amidst the combined forces of demographics, technology, regulation and competition.

A concert of disruptors

The WM industry today is certainly under considerable stress amidst the combined forces of demographics, technology, regulation, and competition (see Deloitte’s Ten disruptive trends in wealth management). A new generation of investors with their idiosyncrasies (i.e., the ‘rewired investor’) are rapidly expanding their control over a large share of US retail assets; Gen X and Gen Y individuals are expected to control more than half of US retail assets within 15 years.

At the same time, advisors are aging out of the workforce; 30 percent of the current population is expected to retire within 10 years. Increasingly a host of new technologies (robo advice, big data, cognitive computing, to mention but a few) make it possible to understand and engage with investors in new ways. Regulators are accelerating a transition by the whole industry to best-interest standards of care that consumers are increasingly demanding.

And finally, new competition and new business models, from fintech firms to banks and insurers leveraging robo advice technology to push deeper into wealth management, are only increasing the pace of innovation and disruption. Disruption alone is not new in wealth management, but what is new is that all these disruptors are seemingly acting in concert, like a troop marching in step over a bridge, causing the structure to oscillate dangerously and requiring an immediate and strong response.

Prime candidate for disruption

The wealth management industry is a prime candidate for disruptive innovation. A recent study of innovation in the financial services industry jointly conducted by Deloitte and the World Economic Forum suggests that disruptive innovation is not a random process. Quite the contrary.

Innovation is a deliberate and predictable process: It happens where large sources of customer friction meet the large profit pools. In the industry, wealth managers have long realized comfortable operating margins while too many investors have been underserved. Large scale, disruptive innovation is very likely to address this imbalance.

Key design principles for wealth managers of the future

These principles are divided into two categories. The first group addresses the kind of experience retail investors will expect of their wealth managers and advisors in the future. The second category of design principles includes business model requirements to deliver that experience.

Principles from an investor standpoint
  • Sentient and highly engaging
  • Human, trusted, and transparent
  • Highly automated, modern, and frictionless
Principles from a business architecture standpoint
  • Platform-based
  • Capital-light
  • Data rich and smart
  • Scaling exponentially


Key features of this proposed functional architecture

Some key features of the proposed functional architecture include:
  • The scope of the automated advice engine will be significantly broader than today’s robo advisor.
  • Advisor and investor workflows and journeys will be integrated so that the investor can easily go back and forth between two parallels paths, directly to the machine or through the advisor to the advice engine.
  • Critical to this functional architecture is an inter-operability layer that allows for robust and flexible interfaces between its component parts.
  • A notification services engine will generate real-time, tailored electronic communications to clients.
  • A digital ID capability will allow investors to create smart digital identities: Their information, from KYC data to goals and financial plans, will be stored in a single repository and accessible by multiple systems and applications within a particular firm, with clear rules for maintaining data integrity.
  • A data aggregation capability (powered by blockchain) will allow wealth managers to add customer accounts across multiple providers, thereby providing a complete view of a particular investor’s balance sheet, and also across investors, allowing for peer benchmarks.
  • A fiduciary engine brings together a set of capabilities required to guide the provision of advice to investors and demonstrates client best-interest standards are being complied to the regulator’s satisfaction.

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A new mindset

Over time, firms can add new capabilities around the core capabilities as they continue to build their automated advice engine and embrace partnerships to support the growth of an ecosystem of leading tools/applications/vendors. Most importantly, firms will need to constantly reinforce a new mindset that will foster innovation in the right direction.

The digital wealth manager of the future will require a new mindset:
  • Automate as much as possible
  • Work with advisors, not against them
  • Design for a new generation of investors
  • It’s about life, not investments
  • Provide quality advice to all investors, not just large accounts
  • Commit to transparent pricing and client best interest
  • Experiment and build prototypes
  • Your brand as a digital brand

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If you have questions regarding this report, please contact any of the following Deloitte Consulting LLP and Deloitte Services LP professionals:

Gauthier Vincent, lead wealth management consulting partner, Deloitte Consulting LLP

Janet Hanson, managing director, Wealth & Retirement, Deloitte Consulting LLP

Jared Goldstein, senior manager, Deloitte Consulting LLP

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