Like most major industries, the financial sector is undergoing a significant shift. Retail banking is being revolutionized, with clients able to set up accounts via a streamlined online process. For brokers, it means eliminating trading costs.

Wealth management is experiencing something similar; albeit, through a different process. Although we at Avaloq expect advice to be automated and digitized, service will still focus on the relationship between client and wealth manager, with trust and reliability crucial for long-term capital appreciation of a client’s portfolio.

“48% of financial advisers say that trust and personal relationships are top factors affecting client retention.”

Forbes Insights

More people have access to a greater quantity and quality of investment strategies and advice that was once reserved for ultra and/or high net worth individuals (UHNWIs & HNWIs). While the younger generation of investors also demand convenient digital solutions. These preferences, along with advances in technology, are fuelling the democratization of wealth management. So, how should financial institutions prepare for this market shift?

“Two drivers that will accelerate this democratization of wealth management are a shift in investor preferences and advances in technology.”

Finextra

First, let’s consider the old, classic method of customer segmentation, where new wealth clients are commonly asked how many assets they own – with more assets under management meaning greater economies of scale. Today, that approach is outdated. Now, it is common for financial institutions to not only support HNWIs but also affluent clients with high potential.