The democratization of Wealth Management: how should banks adapt their services?

Let’s start with the fact: wealth management services are historically addressed to wealthy customers, mainly served by private banks. These services include a privileged relation with the private banker (also called the relationship manager or investment advisor) and high-level services (investment advice, financial planning, tax optimization, estate planning, etc. - to name a few). But the last few years seem to have shown the openness of the financial markets towards retail/mass affluent customers and their growing interest in the investment world. This trend is not just a short-term trend but a societal phenomenon that is set to last.

Investing is no longer reserved to high-end customers


On the one hand, there are several factors impacting retail customers’ interest in investing. One of the examples is about the increasing size of the affluent segment of customers, trend that has been strengthened by the Covid-19 crisis, that allowed people to detain more and more extra cash to invest. According to estimations from the Banque de France, the surplus of savings of French households between the beginning of 2020 and the end of 2021 grew to more than 175 billion euros. As their part of savings has increased, people started to be more and more interested in what to do with their extra money and how to manage it. 

On the other hand, from the market perspective, the growing interest rates, the apparition of cryptocurrency or the rise of FinTech companies, have positively influenced individuals to grow their interests towards the financial markets. The boom of the number of registrations to online trading platforms during the pandemic crisis, for example the investing app Robinhood, also showed that technology and digital platforms are also drivers to the democratization of wealth management. 

Technology as a lever to strategically serve individual investors 


Our mobile phones are no longer simple tools to call and send messages. We use them to read our emails, make video calls, order our dinner, book a plane ticket, and now to pay, make bank transfers or even raise our credit card limit. Placing orders is becoming very simple, at any time of the day or night, and from any location as long as you have an Internet connection. According to a study from the Fédération Bancaire Française, 55% of respondents in 2018 said they had downloaded their bank's mobile application and of these people, 89% use the application at least once a week.  

In the wealth management universe, technology is enabling the democratization: self-service and robo-advisory solutions have to be considered by traditional players, as simpler and cheaper ways to serve a wider audience, meaning retail and mass affluent customers. Digital investment platforms allow the individual customers to be digitally onboarded, to have a proper risk profile and own investment goal, and to access 24/7 to real-time information about their portfolio – bringing more transparency at the end of the day. Last but not least, the data gathered from customers’ day-to-day transactions is a gold mine for banks. Indeed, traditional banks can use this data and analyze it properly to make the right personalized investment proposal at the right moment in the clients’ life. 

Educate the clients and make them loyal through investing


According to a study led by BNY Mellon and Accenture in 2022 (The Future of Capital Markets: Democratization of Retail Investing), 68% of non-investors would be more likely to invest if they had more opportunities to learn about investing. There is definitely still much space to teach individuals about how to invest in order to onboard them to the investment world. Educating the customers about the investment world and rewarding them through special offers on other products (like insurance for example) will make them more likely to expand their range of products/services within the same bank.

And from loyalty comes trust. According to the same study from BNY Mellon and Accenture, 55% of non-investors would be more likely to invest if they had access to an investment platform that they trust. And what could be better than an investment platform provided by your own bank? People might want to invest in the same place they do their banking, and traditional banks have to use investment as a lever to drive customers’ engagement. 

More and more retail and mass affluent customers are interested in investing their savings, and this trend will stay for years. This is the reason why traditional banks need to focus, for the many years to come, on servicing a wider audience. The benefits of proposing wealth management services to everyone will not only drive revenues, but it will also reserve a seat for traditional banks in this highly competitive market.  However, this will not be without challenges, and the first challenge could be the right technology. With the need to stay relevant, banks have to do their part in democratizing wealth management and expand their services to retail and mass affluent customers by providing attractive and intuitive tools that will drive customer interest and engagement in their investment journeys.

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