Bridging the tech gap: an imperative for wealth management in the digital age 

by | Apr 19, 2024

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Written By Mark Fisher, a Managing Director in Houlihan Lokey’s FinTech Group.

The wealth management landscape is undergoing a significant transformation, fuelled by shifting client expectations and regulatory changes, not least of all in the form of the Consumer Duty rules. Clients now increasingly expect seamless service delivery, diverse product offerings, and robust digitisation from their wealth management providers, as their expectations rise in line with other aspects of their tech-enabled lives. 

Several recent studies underscore the significant challenge wealth managers face in meeting customer experience expectations, and it’s crucial for the industry to acknowledge the pivotal role that technology and data plays in addressing this issue. To remain competitive, wealth management firms must be able to adapt by prioritising high-quality customer experiences and embracing technological and data management advancements.


However, despite these imperatives, wealth management lags behind other industries, with clients still subject to archaic processes, cumbersome paperwork and limited digital engagement. While challenger banks allow customers to open accounts within minutes, manage investments on-the-go, and receive personalised financial advice through AI-powered algorithms, many traditional wealth management firms still rely on manual processes, face-to-face meetings, and outdated software systems. This stark difference in approach not only undermines the client experience but also hampers the industry’s ability to attract and retain investors.

Back-office functions within the industry is a particular pain point and are arguably the most in need of technological improvement. These functions, which encompass activities such as compliance, operations, and administrative tasks, often operate on outdated systems and manual processes, resulting in inefficiencies, errors, and increased costs.

One of the primary challenges facing back-office operations is regulatory compliance. The wealth management industry is subject to a myriad of regulations aimed at protecting investors, preventing financial crime, and ensuring market integrity. Compliance requirements are constantly evolving, adding complexity to the operational landscape and increasing the burden on back-office teams.


The implementation of the Consumer Duty rules has further compounded these challenges. Introduced to enhance consumer protection and improve transparency within the industry, the rules require wealth management firms to act in the best interests of their clients, provide clear and comprehensive disclosures, and ensure fair treatment across all client interactions.

Meeting these obligations necessitates robust systems and processes to track, monitor, and report on client interactions, investment recommendations, and compliance activities. However, many wealth management firms still rely on manual methods and disparate systems to manage these tasks, leaving them vulnerable to errors, oversight, and regulatory scrutiny.

The Consumer Duty stipulations also place a greater emphasis on the need for transparency and accountability, particularly in relation to fee structures and investment performance. Clients are increasingly demanding greater visibility into the fees they are being charged and the value they are receiving in return. Wealth management firms must therefore adopt technology solutions that enable them to provide real-time reporting, personalised insights, and transparent fee structures to meet these expectations.


Compounding the necessity to evolve, is the fact that the wealth management industry in the UK is on the verge of facilitating an unprecedented inter-generational wealth transfer. As wealth changes hands from one generation to the next, financial institutions must be prepared to cater to the shifting preferences, values, and priorities of the incoming cohort of inheritors. 

Firms will have a slightly younger client base, many of whom were raised in an era defined by ubiquitous connectivity, possessing a natural fluency with digital tools and platforms. From smartphones to social media, they are accustomed to accessing information, managing transactions, and engaging with content online. 

Moreover, the growing emphasis on environmental, social, and governance (ESG) considerations underscores the need for digital solutions to meet increasing reporting and data requirements. By embracing technology, wealth management firms can provide intuitive platforms that offer comprehensive insights into clients’ financial health as well as their environmental and social impact, driving greater satisfaction and loyalty from younger generations.


Having said all that even this younger generation, and especially higher net worth clients, will still want to have a relationship with or be able to connect with a human being for critical decisions and advice. Firms that have invested in the right technology and data management platforms will be able to release expensive and costly human capital resources away from these more mundane administrative functions to more strategic front-end capabilities.

In any case clinging to the status quo is not a viable long-term strategy. It is essential for industry stakeholders to prioritise innovation and adapt to bridge the tech gap effectively. By doing so, wealth management firms can navigate the complexities of the modern financial landscape and thrive in an increasingly digitised environment. By investing in digital transformation initiatives, embracing agile methodologies, and fostering a culture of innovation, traditional firms can bridge the gap and remain competitive in an increasingly digital world.

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