Digital innovations now threatening institutional advisory and wealth management firms: TABB

The 21st century's digital revolution is now threatening to disrupt the businesses and influence operating strategies of traditional firms

The 21st century’s digital revolution is now threatening to disrupt the businesses and influence operating strategies of traditional financial firms.

In new research, TABB Group says the first wave of this disruption is well underway, affecting firms with the most retail-oriented business activities, where the adoption of new devices and digital functionality has been the greatest, a migration showing no signs of stopping.

As adoption of and comfort with new workflows and analytical capabilities grow, says Paul Rowady, a TABB principal and director of data and analytics (DnA) research who wrote “The Digital Advisor: Successful Transformation for a New Era” – which offers specific strategies for how to compete in this evolving landscape – consumers around the world are demanding greater functionality, smarter, more personalized solutions and cheaper, faster and easier to use mobility-first components in a broader range of their financial activities.

TABB believes there will be a spillover effect into the institutional segment as these capabilities grow and mature and a subset of consumers begin to demand more digital capabilities in their professional financial activities.

“We believe there’s a second wave of disruption already occurring, impacting self-directed investment advisory, wealth management and related investment services,” Rowady says. But a critical challenge in this transformation is the need for incumbents to innovate along with digital-era upstarts, simultaneously right-sizing their often bloated cost structures.

It turns out, he adds, incumbents do have some advantages, among them the value and richness of their data. “However, with analytics being a key element of digital offerings, along with omni-channel consistency and enhanced user-experience designs, the main question now is whether the incumbents can change fast enough with a growing field of innovative, digital-era upstarts eyeballing their lunch.”

To banks focused on online brokerage, wealth management and other investment advisory processes, TABB advises they be supported and armed with better data, analytics and user-centric tools.

To financial advisory firms and related businesses, Rowady says, “Realize the value of your data and the depth of history of that data. Find a partner with deep expertise in foundational data management services and solutions and consider more closely what they have available in cloud offerings.”