Part 1: experiences from the wealth management area
In wealth management, innovations need challengers and ambitious goals. They usually need some time and patience too. It’s all like putting a ladder against the Moon. July 20, 1969 was one of those days which made a world of difference for mankind. Neil Armstrong has become the first man to walk the Moon. The success that came seven years after president Kennedy gave his speech to support the Apollo program was not the only achievement in that story.
At the time of the speech, most of technology needed to get to the Moon didn’t exist. A lot had to be improved to launch the craft, reach the Moon and get back safely.
What can we learn from that story 50 years later? And, is there any analogy between space missions and innovations in finance? There’s at least one: whenever we employ “moonshot thinking”, we shouldn’t forget that until our destination is reached, we need to tread lightly – on Earth. Hand in hand with our clients.
Let’s look at a few examples:
Number one: robo-advisory. There have been huge expectations in banking for fast business growth in this area. The idea was simple – give clients a self-directed advice with no human involvement. Fintech robo-advisors were to shake up the industry. Then we’ve seen partnerships and acquisitions made by global fund managers or banks. But recently, many retail banks have decided to redefine their strategy for robo.
The first lesson learned was: before you give books to people, teach them how to read.
The biggest challenge for robo was not even the broad client base which investment managers and fintechs didn’t have. It was the homework banks didn’t do to help robo grow: educate clients and create a need for portfolio-based, regular investing. This could have made roboadvisory a commodity – not just an exclusive or niche product as it happened in many cases.
But there was a little bit more to the story – a human touch.
End-to-end self-service investing turned out quite revolutionary to many clients. The plan that direct channels will work as usual and meet people’s needs has not come true fully. Elimination of a human factor in this process was quite an optimistic concept.
And so, the second lesson was: you can’t ignore habits and make everyone 100% digital.
It is hard to replace a human each and every time. Wealth management is where human touch is still important for many. Hybrid approach became a solution for that problem.
But a real test came when the industry tried to blend private with personal. Social or lifestyle data became a new Holy Grail to provide eternal happiness through personalisation of everything, anywhere and at any time. At the very beginning, when the banks tried to dig into personal data, the most important challenge seemed to be how to capture, analyse and understand the data. Then the fundamental problems emerged – regulations and customer resistance to share everything of their lives.
The third lesson was: you don’t want to bite off more than you can chew.
Let’s take an example from other industry. A couple of years ago one of the retail chains used its customer consumption patterns to predict life events. One of them was pregnancy, predicted based on certain number of goods women were buying. The retailer started to send coupons for baby items “at the right time to the right customers”. You can imagine not every customer was happy… So even if you follow the law, it doesn’t mean you always act in the best interest of your customers. What is applicable to the whole population, doesn’t apply that well for every single individual.
Several years ago, it was hard to envision doing banking on your smartphone. Now you cannot imagine the opposite. When virtual reality (VR) and augmented reality (AR) technologies were introduced to wealth management, it seemed a way to go. Sure, VR is helpful: for education, immersive learning, data presentation or visual guidance. The idea of a virtual branch office is even more alluring. But VR at this moment is not necessarily perfect for complex operations or data filling. Control and usability it gives are not that great in comparison to smartphones. So – why would clients use it in the first place?
Sometimes what looks like a great idea for an innovator is not necessarily great for clients – at least not so quickly as bankers would like to. Clients and their habits change slower than we think. So get clients out of their comfort zone at the right pace. Make them self-confident and assist them in the process. Think in advance how clients will use your technology to make it truly valuable.
And your ladder may just be long enough to reach the Moon.
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By Grzegorz Prosowicz, consulting director, asset & wealth management, Comarch