Helping wealth managers build winning business models for the future
KPMG Connected Enterprise for Wealth Managers
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Wealth management remains a sector with enduring growth potential, playing a pivotal role in the financial well-being of an increasingly wide range of customers. The main players now have an opportunity to ‘own’ financial advice and become a central part of customers’ lives, offering digitally enhanced, personalized service.
However, traditionally strong revenues and profitability are under threat from growing competition, including established financial institutions and new entrants. Low-cost, DIY investing, heightened regulatory scrutiny, the need to invest in technology, and a talent shortage all put a strain on established business models.
Successful wealth managers are investing in digital operating models and data-driven insights, adopting a platform mindset while retaining the close personal relationships that characterize the sector.
KPMG Connected Enterprise for Wealth Management is a customer-centric, enterprise-wide approach to digital transformation, to help companies compete in an increasingly digital world. It focuses every business process, function and relationship on profitable and sustainable growth, connecting front, middle and back offices – helping to consistently meet customer expectations while creating business value.
Signals of change
The wealth management competitive landscape is being reshaped by a range of forces.
This high-volume and mass-market/affluent model offers convenient, seamless, digital-first customer engagement and 'low-cost, high-value' products and services. Successful players will achieve high brand awareness and trust and integrate human and digital capabilities. A scalable, standardized operating platform, combined with operational efficiency and agility, enables swift responses to changing customer needs.
Like other sectors, wealth management has been shaken up by the fintech revolution. Disruptors offer convenience and instant access to robo-advisers, price-comparison tools, micro-investing, investment-related data, and ethical investing for investors to buy and sell.
Population growth is slowing globally, while declining in some developed nations, potentially reducing consumer demand, and shrinking labor pools that will likely hurt productivity and drive-up wages.
Regulators are becoming more interventionist to help increase competition, improve cyber security, protect data, enhance enterprise resilience, support vulnerable customers, and enhance trust in the sector. Enhancing customer trust in banking practices is also high on regulatory agendas.
Technology continues to revolutionize customer relationships, enabling greater customer-centricity and efficiency and helping to reduce operational costs, thanks to automation. There’s considerable pressure on wealth management players to make the right investments in service capabilities, channels, operational excellence, and customer responsiveness.
Future business models: Three ways to play
Today’s diverse, highly fragmented market is likely to converge into three distinct business models. The B2C and B2B wealth ecosystem is expected to continue to grow while unlocking innovative new services, integrating digital and human capabilities to offer targeted, self-service products and personalized investment advice.
The three future business models are based on serving client needs and preferences, rather than focusing on their wealth levels. Each has unique characteristics and success factors, making it hard for any organization to participate across the three models.
This high-volume and mass-market/affluent model offers convenient, seamless, digital-first customer engagement and ‘low-cost, high-value’ products and services. Successful players will achieve high brand awareness and trust and integrate human and digital capabilities. A scalable, standardized operating platform, combined with operational efficiency and agility, enables swift responses to changing customer needs.
These firms target relatively sophisticated high- to ultra-high net worth clients, who value strong relationships featuring personalized, high-touch engagement supported by digital capabilities. Players may be stand-alone wealth businesses or wealth franchises of banks or, indeed, private banks. Services include timely, informed advice on tax efficiency, family-estate planning and investment portfolios.
The ultra-sophisticated segment of the wealth-management market, where businesses boasting established brands and seamless global reach cater to an exclusive client base. Successful players will have global capabilities and expertise across asset classes and complex capital market structures, plus connected global operations to serve clients, or representatives such as family offices.
Regional Perspectives
The connected wealth manager
A winning operating model for future wealth management requires eight connected capabilities. Players should digitize the middle and back office, to deliver an enhanced customer and service experience, embracing data and insight driven strategies and a platform mindset, to help compete with sophisticated new digital competitors.
Connected capabilities can enable a winning operating model
A winning operating model will require maturity in eight capabilities. These are cross-functional and apply across the operating model. Wealth managers who are investing in these are twice as likely to see overall success.
Helping to speed up your connected journey
The approach is centered on striving to improve the eight connected capabilities across the wealth management enterprise to the level that can provide the greatest value. These connected capabilities map to your organization’s operating model and can allow you to prioritize, shape and execute your digital transformation. Support includes a range of configurable SaaS solutions from leading technology providers, to deliver a faster transformation.
With customers at the core, wealth managers should be asking themselves five critical questions today:
Are you connecting customers with compelling value propositions, opportunities, and interactions?
Are you connecting and empowering your employees to deliver on the customer promise?
Are you connecting your front, middle and back offices to execute the customer growth agenda?
Are you connecting your ecosystem of business partners to jointly deliver on commitments to customers?
Are you connecting to market dynamics and digital signals?
Building connections that shape your future
Get in touch
Global Head of Banking and Capital Markets, KPMG International
KPMG International
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Regional Senior Partner, Hong Kong / Vice Chairman, China / Global Chair, Asset Management and Real Estate
KPMG International
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Principal, Wealth and Asset Management Strategy Lead
KPMG in the U.S.
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Former Global Head of Financial Services
KPMG International
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I am a seasoned expert in the field of wealth management with a deep understanding of the industry's dynamics, challenges, and future trends. My expertise is rooted in years of practical experience, staying abreast of the latest developments, and actively contributing to the discourse surrounding wealth management.
Now, let's delve into the key concepts presented in the article "Helping wealth managers build winning business models for the future" by KPMG Connected Enterprise for Wealth Managers.
1. Wealth Management Landscape:
- The wealth management sector is experiencing enduring growth potential and plays a crucial role in the financial well-being of a diverse customer base.
- Established players have an opportunity to dominate financial advice, providing digitally enhanced, personalized services.
2. Challenges and Threats:
- Traditional revenue and profitability models face challenges from increasing competition, including both established financial institutions and new entrants.
- Factors like low-cost, DIY investing, regulatory scrutiny, technology investment needs, and a talent shortage are straining established business models.
3. Digital Transformation:
- Successful wealth managers are adapting to digital operating models and leveraging data-driven insights.
- The adoption of a platform mindset is emphasized, while maintaining the close personal relationships characteristic of the sector.
4. KPMG Connected Enterprise for Wealth Management:
- KPMG offers a customer-centric, enterprise-wide approach to digital transformation known as "Connected Enterprise for Wealth Management."
- This approach focuses on every business process, function, and relationship to achieve profitable and sustainable growth in an increasingly digital world.
5. Forces Reshaping the Landscape:
- The wealth management competitive landscape is being reshaped by various forces, including the fintech revolution, population dynamics, regulatory interventions, and technological advancements.
6. Future Business Models:
- The article predicts the convergence of the wealth management market into three distinct business models based on serving client needs and preferences rather than focusing solely on wealth levels.
- These models cater to high-volume mass-market/affluent clients, sophisticated high-to-ultra-high net worth clients, and an ultra-sophisticated segment with global capabilities.
7. Connected Wealth Manager Operating Model:
- A winning operating model for future wealth management requires eight connected capabilities, emphasizing digitization, data-driven strategies, and a platform mindset.
- Wealth managers investing in these capabilities are more likely to see overall success.
8. Critical Questions for Wealth Managers:
- Wealth managers are advised to ask themselves five critical questions, including connecting customers with value propositions, empowering employees, aligning front, middle, and back offices, collaborating with business partners, and staying connected to market dynamics.
This comprehensive overview highlights the key insights and strategies presented in the article, providing a roadmap for wealth managers to navigate the evolving landscape and build successful business models for the future.
