How tech is spurring a digital transformation revolution in wealth management

Recent years have seen digital transformation in the wealth management sector become less of a desire and more of a necessity. While the challenge of providing clients with a transformative experience can still cause plenty of industrial head-scratching, emerging technologies like AI and blockchain are paving the way for unprecedented efficiency in a competitive landscape.

Today, digital transformation remains a priority among a vast array of wealth management firms. In fact, 55% of industry leaders suggest that digital transformation is their most important strategic initiative. Furthermore, 28% of IT budgets are now allocated to digital transformation, representing a significant increase from the 11% recorded one year ago.

Digital transformation in wealth management can be complex because of the dangers posed by inefficiencies. The risk of losing the wealth of clients can be extremely damaging to all parties, so the incorporation of technology needs to be flawless.

But how is technology driving wealth management digital transformation? Let’s take a deeper look at an industry in the midst of a technological revolution:

Harnessing the Value of Digital Engagement

Bustling global fintech hubs are driving digital transformation throughout financial services, helping to leverage new operational capabilities and strategies.

While this is a positive wave of innovation, it’s also brought heightened client expectations. For wealth management firms, it’s now imperative to offer more personalized and high-touch client experiences through digital engagement.

Innovative fintech hubs in San Francisco and Tel Aviv are providing firms with the tools to equip clients with on-demand data, technology, and actionable insights that can boost portfolio performance, decision-making, and overall investment returns.

This is making the challenge of re-evaluating digital offerings essential for financial firms, and we’re already seeing more use cases emerge in a bid to offer transformative insights.

Offering accurate real-time data to clients is not only helping to deliver stronger levels of digital engagement for users but also when it comes to compliance and staying in line with regulations. Because all wealth management firms are unique, digital transformation is helping to uncover tailored solutions to keep firms highly functional and compliant at all times.

Wealth Management in the Age of Generative AI

The role that generative artificial intelligence can play in the digital transformation of wealth management solutions is one of the worst-kept secrets among the industry’s most innovative players.

“AI, particularly generative AI, will enable wealth managers to enhance operational efficiency, drive top-line growth, and mitigate risk,” explained Tim Worner, National Wealth Management Leader, Deloitte Australia.

“The most effective AI use cases in wealth management include improving advisor productivity through tasks automation and personalized client engagement, streamlining client servicing functions, optimizing technology and operational efficiency, and enhancing regulatory compliance monitoring.”

The generative AI boom has brought fresh opportunities to a range of industries, and the quality of client insights, stronger levels of productivity, and experience for financial advisors make for a strong case for wealth management firms to actively consider how to incorporate GenAI into their operations.

Crucially, the use of generative AI solutions can aid financial advisors towards more meaningful levels of client engagement in a way that can bring higher new client acquisition volumes and greater wallet share among existing clients.

By integrating customer relationship management (CRM) platforms with GenAI platforms, firms can utilize next-best-action recommendations to bolster lead generation, support meeting preparation, and also enhance productivity across operations.

These productivity enhancements can help to bring automation to manual administrative tasks, too. This means that financial advisors can free up hours lost on pre-and-post meeting paperwork, and instead make use of dynamic agendas, as well as key life event and client milestone tracking in real-time.

Uniting Data with Blockchain

Although blockchain is largely associated with cryptocurrencies like Bitcoin today, the technology’s capabilities make it an exceptional fit for other fintech roles.

According to Deloitte, the use of blockchains in wealth management can help to deliver greater transparency, security, and fewer associated costs.

Because wealth management firms can store copies of reference data on blockchains that are fully immutable and impossible to alter without gaining a network consensus, they can offer a reliable means of storing essential data securely.

Blockchains can also utilize smart contracts, which are self-executing programs that can actively monitor client books and make automated alterations based on a series of pre-defined rules.

Additionally, smart contracts can make essential provisions like privacy protection and KYC more cost-effective. This will help wealth managers to deliver more reliable interactions with clients while building better levels of trust.

Israel’s Front Row Seat to Next-Generation Wealth Management

As one of the world’s most innovative fintech hubs, we’re likely to see Israel’s sprawling tech landscape drive much of this digital transformation in wealth management over the coming years.

Despite the challenges that 2023 has brought for tech investments throughout the startup nation, with venture capital funding slowing from $6.8 billion in 2021 to $1.5 billion in 2023, much of this can be attributed to a maturing throughout Tel Aviv’s bustling tech hubs.

It’s this newfound maturity that’s seeing more fintech firms grow organically and is helping leading players to work towards a sustainable future without focusing on quick exits.

“In 2013, [banks] thought ‘I’m building to sell and do an exit’; then they thought ‘I’m planning an IPO.’ Now there seems to be a better understanding of the role fintechs play,” explained Gal Aviv, Founder and CEO of Tel Aviv fintech firm Blender.

Furthermore, Israel’s wealth management sector is showing many signs of growth despite fintech funding slowdowns.

The second half of 2023 saw Swiss private bank EFG International establish a Tel Aviv office headquartered by Credit Suisse Israel banker Joseph Wolf, with the expansion suggesting that it “aims to capture the significant wealth management opportunities in this market.”

We’ve also seen Israeli firms look to build a presence on the global stage, with fintech Nayax seeking to operate in Latin America following a recent acquisition.

This offers significant evidence that the Startup Nation is indeed transforming into the Scale-Up Nation, and will likely position itself at the forefront of digital transformation in the wealth management sector.

Finding Opportunities in Digital Transformation

The digital transformation revolution in wealth management is likely to be challenging for an industry that’s so heavily steeped in traditional practices.

However, the rise of emerging technologies like generative AI and blockchain have the capabilities to introduce a frontier for wealth management that seemed impossible just last decade.

With an unprecedented level of access to vast swathes of actionable data, greater industry transparency, and intelligent automation, the future looks bright for the world’s most ambitious wealth management firms.

For Tel Aviv’s most innovative fintechs, these emerging technologies may have presented themselves at a perfect time as a maturing wealth management landscape meets fresh opportunities.