The swinging pendulum: navigating private wealth management’s state of flux

If you heard Michael Blomfield (chief commercial officer, Iress) speak at SAFAA 2021, you’ll know he’s nothing short of knowledgeable—not to mention engaging.

Here, Michael takes us on a journey down the rabbit hole of private wealth management, offering his take on the current and future state of the industry from his vantage point in the box seat of fintech.

Private wealth management today, what are you seeing?

Put simply: the industry is experiencing significant transformation. It’s now about putting the client first, rather than the market. And then it's about knowing who the client is in totality. Is it just the person you speak with each week, or is it also their partner and kids, and their trusts? In reality, it’s all of them. Private wealth managers need to get a 360-degree understanding that the full client relationship has to be at the centre of their value proposition. It’s now so much more than a conversation about what to buy and sell today—it’s about how we can produce advice to fit the full set of needs that clients have over their lifetime.

How long can private wealth managers wait before jumping on the digital train?

Oh, probably about another three minutes! In all seriousness, most people looking to invest their money somewhere are engaging first and foremost in the digital online world. What does that mean? Essentially we’re talking about the smartphone. Anything that doesn’t ultimately have that device at the centre of the proposition is missing the point. Having a ‘somewhat’ mobile-optimised offering for portfolio reporting isn’t going to cut it. You can’t have people constantly flipping their phones around to landscape and trying to zoom in—it’s just not going to work.

It’s about understanding how to deploy a sophisticated, genuine private wealth proposition into a digital environment—one that powers the relationship. Because nobody wants to fill in a form, find a scanner, or wait in a queue. That’s the digital challenge for private wealth. Understanding how to embrace it in a way that adds to the value proposition but doesn't replace it.

So, is there a sweet spot for digital client engagement?

Historically, firms have invested in core technology—what I would call achieving competitive parity. Meaning when regulation changes, they’re all investing in the same thing. So, what’s left for investing in technology to gain a competitive advantage? Not a whole lot.

The industry should be thinking about how we plumb the system together to take away all of the competitive parity obligations and rent it back to private wealth businesses as infrastructure. Doing this leaves the capital they used to spend on competitive parity available to spend on competitive advantage.

What is that competitive advantage? Tech plays a part, of course, but it’s not first in line. What’s first is people. We’re talking about private wealth—so if the person answering the phone has little-to-no bedside manner, then they're out of business. That’s the real competitive advantage—your people, and how well they’re trained. Once that’s sorted, then we can talk tech.

And the technology might be straightforward, like integrating with an automatic call distributor that tells the broker which client is calling, so they can answer the phone using the client’s name. Or it could be an integrated desktop, so it surfaces the whole client file at the moment of their phone call. This is what a client-centred relationship looks like—and that’s the sweet spot.

Are high-net-worth individuals (HNWI) being adequately serviced?

Generally, HNWI have a wide range of assets and they get their data from a variety of places. They likely do this via their smartphone, so they’re navigating through a host of different apps at the end of every month, finding values for their cash, super, SMSF, properties, and family trust—plus their non-custodial assets. Then they are plugging all of this data into a spreadsheet to figure out what they're actually worth.

So, what's the problem with that? Well, aside from being a massive inconvenience; what do you do with private equity? Where does it go? How do you aggregate all assets to one central point? A private wealth manager can be this central point, but they need to get their business right.

As a private wealth manager, you need to avoid the risk of being just another datafeed, and instead, turn this need into an opportunity: Help your client get a better sense of their actual value.

When we really look at it, it’s easy to see that the total needs of these clients are far from being met.

And the future of private wealth?

Years ago, the market was at the centre of the advice proposition—today it’s the client. Now you can understand a client’s portfolio and have their multiple portfolios interact with each other—that's the only way to manage total wealth.

So we're on the way, no question about it, and I think we're doing decent work to drive the client relationship to the very centre of the interaction, technologically.

Lasting change takes time, however. It’s a process that’s not done and dusted in one fell swoop. Focusing businesses on harvesting their capital to compete, rather than keep up, will free up enormous innovation and will ensure more and more that the client, in all their uniqueness and complexity, is at the centre of the relationship. And that will be well worth the investment.

This article first appeared in SAFAA Monthly - July 2021. Read it here.