Goodbye old Wealth Management. Make way for Financial Wellness!

The recent coronavirus pandemic has triggered radical changes in both our private and professional lives, and – although it is difficult today to assess their depth and duration – some of them seem destined to impact our way of life for an exceedingly long time, perhaps forever.

It is true, every time we say “this time it is different” and then everything goes back to the way it was before and we forget the lessons of the previous crisis. But… this time it is different! Today’s crisis has a global and synchronous impact on the way we live. The second world war was probably the only comparable situation, but at that time the world was not globalized and, above all, there was no internet. Quite a substantial difference.

So, let’s try to get a little more concrete, restricting our analysis to a well-known sector: the financial industry in general and in particular the wealth management one. Here there gonna be two types of changes: both substantive and methodological.

From wealth management to financial wellness

Certainly, the current crisis phase has taken away some levity, but, at the meantime, it has given us back some sense of purpose. The sense of things and actions has become important once again, and we are re-learning to focus on what is really essential and simple: family, work, distant friends, and the physical and mental health of ourselves and our dependents.

A paradigm shift that suddenly renders the definition of wealth management slightly obsolete. As BlackRock pointed out in its Global Investor Pulse survey last year1, nowadays it might be more appropriate to talk about financial wellness. Saving is part of something broader, affecting people’s overall wellbeing.

This emergency has made it sadly clear that there is no money or social position that can protect us from illness. Money and wealth are part of a general condition that allows us to live well, or to face an uncertain future, but on their own they are not enough and have little intrinsic meaning.

From product to customer

In brief, this crisis, with all its dramatic consequences, has at least the merit of having accelerated the wealth management industry’s transition from the product era to the client one.

In other words, it will no longer be the financial or insurance product that will influence the dynamics of the industry, but it will be the client, with his real needs and life goals, that will guide the development of ad hoc solutions. This is all part of a more industry ‘holistic’ vision, in which such as investment and financing products, non-life and health policies, and pensions, are the fundamental ingredients to be dosed differently according to everyone’s needs.

How? There is no tools shortage, offered by technological developments: data analytics, customer profiling tools, engagement tools for relevant and customized communication. Perhaps, we also need a different approach to portfolio construction, which is more tailored and long-term, a dynamic approach that changes with events and lifetimes.

A transformation that will inevitably affects also communication.

Changing modes: digital services and quality customer experience

About the end of the “lockdown” there is still a lot of uncertainty, but one thing is certain: financial and insurance advisors will not be able to meet clients and conclude in person transactions for much longer: they will necessarily have to invent different ways to stay “Far Away But Close” to their clients.

Digital placement services for financial and insurance products will accelerate at an unprecedented pace, and to everyone’s satisfaction, paperwork and bureaucracy will be reduced. Who will ever want to go to the branch, signing forms and contracts for hours? Who is going to trust their promoter or banker, whom they do not know?

We are not thinking about robots that are destined to replace humans in everything: we are rather talking about an advisor’s “allied” technology that complements and helps them, on one hand, and that is useful and simple for clients, on the other.

The advisor role will remain fundamental, not only for the many irrational behavior aspects, and for the reassurance needs linked to assets, but, operating almost exclusively by phone, advisors will need more and better digital support.

No more incomprehensible, tortuous websites from which nothing can be done: what is needed is a very different customer experience level, such as that to which consumers are now accustomed in e-commerce (and which they also rightly demand from the financial industry).

A golden opportunity for a leap in quality

Not least because the crisis and the lack of mobility have made people take a considerable leap forward in terms of digital skills. Nowadays, groceries, prescriptions, account balances and pensions are all done online: even after the lockdown, your clients will never be the same as they were before.

In summary, the wealth management industry needs to move, and quickly. Massive investments in digital technology are needed, not so much economically as culturally. But we also need a decisive technological upgrade and digital education for advisors. Above all, a whole new way of thinking is needed.

This is a unique opportunity for wealth managers to make a huge qualitative leap and build a new relationship based on trust, transparency and quality of service.

The new industry challenge is based on a renewed sense of trust and transparency, and those who do not play the ‘digital renaissance’ game will become irrelevant. Those who seize this opportunity will be able to build a ‘long-term advisory’ relationship with their clients, who ultimately do not want to take care of their savings by themselves and are happy to entrust them to someone experienced and trustworthy. And in the long run, this will also have a very positive impact on the income statement, as the focus will be on the long-term client value rather than short-term fees.

We shall see, and all the rest will be… Fintech.

The Virtual B solution

Virtual B has been working for years in the financial sector, in close contact with data and its analysis. Our experience has resulted in numerous solutions that generate value and solve problems for financial and insurance intermediaries.

And if you would like to discuss this with us, we are happy to do so. You can use the “contact us” form to request an explanatory demo of our wealth management solutions.