Wealth Managers Need a Fresh Approach to Innovation to Master the FinTech Challenge
Aug. 25, 2016
Global wealth managers are embracing innovation, but in many cases they are not really addressing the deep strategic change that is putting the industry under more and more pressure. This is a key finding of our report "From Disruption to Innovation - How Wealth Managers can Master the FinTech Challenge".
The results clearly indicate that significant amounts of monetary resources are being deployed to develop and implement new digital initiatives, and further growth of these resources appears to be ensured. About 30% of respondents expect their innovation budgets to rise more than 20% within one year, and about half of these expect growth of more than 50%. The report identifies where the bulk of the investment budgets for digital innovation goes and reveals which other important fields receive low importance ratings and tend to be neglected in terms of budget share.
Innovation budgets follow inward-looking approach
But not all is picture-perfect when it comes to innovation in this still conservative sector. Our survey found that wealth managers are taking a markedly inward-looking approach to their innovation projects. Yes, there are multi-million dollar budgets for new technologies, but as the report details, for each field of innovation most of the money is spent on incremental innovation rather than big, disruptive technologies.
Another unsettling finding is that the measures for encouraging and fostering innovation are taking their perspective mainly from within the organizations: management leadership, client data and surveys along with workshops are the most popular innovation mechanisms. The research data show the means by which wealth managers aim to realize digital innovations.
MyPrivateBanking sees a real danger in a strategy that makes “following the client” and “putting the client first” the only strategic imperative instead of also anticipating future client needs and embracing new technologies early on. The combination of ‘intelligent’ algorithms and the penetration of mobile technology is an innovative leap for the banking business. However, many wealth managers and private banks are in denial about these changes, believing that it is mainly the retail sector that will be affected.
Wealth managers need to focus on disruptive innovation projects
New wealth management platforms can deliver all essential wealth management services for a fraction of the usual private banking or advisory fees through the innovative use of digital and mobile technology. The report highlights ten examples of disruption related to wealth management, including some incumbent institutions that are increasing their own disruptive potential by their innovation response.
It becomes very clear that when confronted with disruptive change on the level of the business model, firms cannot be successful if they only respond with incremental, step-by-step innovation. The report looks at how wealth managers and banks are innovating today and what their initiatives look like. It offers answers regarding the best way to combat challengers using digital innovation and the areas on which they should focus.
About the report:
The report “From Disruption to Innovation - How Wealth Managers can Master the FinTech Challenge” is based upon 40 structured interviews with managers and executives of large, international private banks and wealth managers worldwide. In addition, the MyPrivateBanking analysts have carried out in-depth qualitative interviews with a select group of digital leaders in the wealth management industry to obtain their insights.
The report details the state of wealth management innovation in the surveyed institutions, such as their areas, resources and means of innovation as well as their objectives and how they measure innovation success. In addition, the report highlights ten examples of disruption related to wealth management, including some incumbent institutions that are increasing their own disruptive potential by their innovation response. For more information on the report please click here.