November 29, 2017
Australian wealth management firms face a host of challenges in 2018. Greater regulatory uncertainty, tightening profit margins, increasingly empowered customers, and disruptive entrants into the sector are putting digital wealth management leaders on the hot seat.
Recent developments in the wealth sector also show that independent fintech investment platforms are a force to be reckoned with, and can potentially threaten incumbents’ dominant position in the market.
Forrester sees the wealth management market changing rapidly as:
- Customers’ interest in SMSFs increases. The self-managed super fund (SMSF) is the fastest-growing part of Australia’s superannuation system. More than two-thirds of Australians who have more than $1 million in their super have an SMSF. Australians who choose SMSFs over large funds do so to gain greater control, tailor how their SMSF invests based on their individual needs, and minimize taxes.
- Disruptors enter the SMSF market with software and automation. Companies such as Stockspot require as little as $2,000 from investors to set up a portfolio, use algorithms to assess risk and rebalance portfolios, and give financial advice. Ignition Wealth provides a low-cost, high-compliance SMSF appropriateness tool that lets advisors, accountants, and financial enterprises reduce the time and expense needed to comply with rules and regulations around SMSFs.
- Customers seek easy-to-understand access to global equity markets. Getting access to international equity markets in Australia has been highly intermediated, expensive, or hard. Many self-directed Australian investors, notably those with SMSFs, want exposure to global companies that’s cost-effective, easy, and convenient.
Other disruptors are targeting customers with niche needs particularly those who are environmentally or socially conscious, as well as the millennials.
But not all digital leaders at incumbent wealth management firms are resting on their laurels. These leaders are putting customers at the heart of what they do and are supercharging initiatives to:
- Improve digital customer experience. Many Aussie wealth management firms are looking at ways to use technologies to deliver great experiences that customers value to grow their business. To improve customer service and engagement, several Australian wealth management firms have embraced design thinking and are developing a human-centered design mindset. To improve their advice to received by customers, firms such as AustralianSuper and CBA are developing tools and technologies that use customer data, predictive analytics, and algorithms to guide customers to the right financial decisions for their situations, with a human advisor leading the conversation.
- Improve operational excellence. Some Australian wealth management firms such as Westpac and REST Industry Super are focusing on transforming teams, processes, and business operations to service customers. These firms are rationalizing and streamlining processes and products, embracing cloud technologies, and doubling down on machine learning and predictive analytics capabilities.
Click here to read more about the Australian digital wealth management trends to watch in 2018, and what wealth management firms are doing to turn disruption into opportunity.