Sparking innovation in the wealth management industry in 2020s

Innovation is vital to business success. Executing on big ideas requires a willingness to take risks, an ability to beat the competition to the punch, and the courage to embrace failure as a learning tool. Due to the challenging nature of innovation, many firms in the wealth management industry have been faced with criticism that they are adapting too slowly to the wave of disruptive change that has been redefining so many other areas of financial services.

How can the wealth management industry innovate? What can be done?

I have recently read a copy of ‘Innovators Become Leaders’, result of a joint effort between MasterCard and Harvard Business Review Analytic Services (HBRAS).

For the purpose of the research, HBRAS surveyed more than 1,000 business execs and found that many of the world’s most innovative organizations share 5 key traits: speed, data-driven decision making, commitment from the top, an entrepreneurial culture, and a relentless focus on the customer.

Speed

It’s difficult to overstate the importance of speed in business. With the pace at which society progresses, fast and accurate customer service matters and it is what clients expect. Companies that fail to achieve it can’t expect to win the loyalty of increasingly demanding consumers and run the risk of falling behind nimble competitors.

Tip for wealth and asset management firms:

  • Act promptly: in a world where everything is moving so rapidly and clients expect a quick reaction to their questions, moving fast is critical. It’s therefore imperative acting promptly on new business enquiries, acting promptly in returning calls and setting appointments, acting promptly on instructions from a client by providing them with written acknowledgement and progress reports.
    If you can’t do that, your competitors sure will.
    Note: it is important to prioritise speed, but not by sacrificing security best practices nor by compromising a relationship by cutting corners! A prudent and balanced approach is always required.

Data-driven decision making

Companies can go fast but get nowhere if they don’t have a roadmap to guide them. For many companies, that roadmap is built on data. Using multiple external and internal data sources and advanced analytics is key to make informed decisions as the data analysis produces valuable insights to better understand clients, what clients want, what they need and what they care about. Customer insight helps companies make better decisions about how, when and what to offer.

Tip for TCSPs and wealth management firms:

  • Kill “zombies”: killing zombies means getting rid of products/services/tools/ strategies that do not work. Expanding the range of products/services, using new tools and introducing new business strategies is important but these should be backed by analysis to track and monitor the effective results. If the results and the ROI do not meet the expectations, it is better to simply ‘kill the zombie’ and redeploy resources in areas where you see more growth opportunities. Please accept the fact that even the smartest ideas may not pay off.

Commitment from the Top

An explicit commitment to innovation can go a long way toward making it a reality. Top management commitment is critical to pursue new targets and new strategies; no matter what, whether a new service line or a new way of doing things, innovation culture is substantially dependent on support and driven by commitment of top management.

Tip for CEOs and MDs in the wealth management and financial industries:

  • Lead for today, think for tomorrow (listening to diverse voices): as CEOs and MDs, you are required to keep the organisation delivering on its current obligations, but you can also start to lead and develop staff through a process of thinking about innovation. As a leader, try to foster an environment where you role-model a growth mindset, encourage your teams to share their views (even to speak the uncomfortable truths!) and seek feedback regularly. The key to innovation is getting everyone aligned and committed to the common goal.

Entrepreneurial culture

A business culture wedded to old ways of doing things and too rooted in the past will miss some great opportunities along the way. By contrast, having a culture that embraces change and diversity of opinion can go a long way toward achieving success. Looking at challenges from different angles can yield ideas and insights that otherwise might be missed.

Tip for CEOs and MDs in the wealth management and financial industries:

  • Seek and treasure diversity: it is crucial to harness the collective uniqueness of people. When people bring forward all that makes them unique – from their backgrounds and ethnicities to their life and work experiences – and then they place those differences alongside each other, you end up with a collective perspective that is both broader and deeper than any one perspective could be on its own. This is how you can avoid falling victim to the same challenges and blind spots again and again.
    Note: bringing different perspectives together can lead to friction – but friction sparks new ideas!

Relentless focus on the client

Is it really possible to create innovative products without knowing what the clients need, want, or expect – or how, when, and in what circumstances they would use the new services? The answers to these questions are obvious. Maintaining a laser focus on the client and putting the client at the center is therefore key.

Tip for TCSPs and wealth management firms:

  • Ask clients about their priorities: to design and offer solutions that address the client pain points and deliver tangible benefit requires a personalised approach which comes from an in-deep knowledge of the client’s individual requirements and situations. In all the meetings you attend, ask your clients about their priorities, what you can do to support those priorities, and how you are currently doing to help with those priorities. An open relationship with your clients and the feedback you receive will help you offer best services and highly profiled products.

We all know the saying “Nothing changes if nothing changes.” Well if nothing changes, we stay the same. We don’t grow. We don’t evolve. We don’t get better. And that’s not going to work—not for us, not for the clients, and not for the industry. We need positive change. We need new ideas. We need innovation.

“Learning and innovation go hand in hand. The arrogance of success is to think that what you did yesterday will be sufficient for tomorrow.” –William Pollard