4 Ways Decision Intelligence Fuels Wealth Management Growth
Wealth managers are adopting a new data-driven approach to drive operational efficiency, accelerate growth and enhance client experience.
Wealth managers are experiencing a period of profound change, and are increasingly turning to decision intelligence to gain a competitive edge. Decision intelligence, which combines data science, knowledge graphs, AI and behavioral analytics, is providing wealth managers with a step-change in ability to unlock the value of their data to accelerate profitable growth, enhance client experience, and optimize operations.
The need for change in wealth management
While global net wealth grew by 4.3%1 in 2023, largely down to a rebound in financial markets and growth in assets under management, profitability remains a concern for wealth managers, with recent improvement in margins more down to windfall profits from net interest income than any underlying transformation that can be relied upon long-term. Investment in new technologies and approaches is essential to ensure sustainable growth.
Changing client demographics are also forcing wealth managers to rethink their business models. As the preferences, attitudes, investment philosophies, goals and beliefs of their client base changes, firms need to ensure that their product offerings, workforce and engagement models are matched to their evolving needs. For example, an ageing baby boomer population will see investment decisions increasingly made by women, who are expected to live longer. We are also on the verge of a massive transition of wealth, with Gen X, millennial and Gen Z heirs set to inherit around $68 trillion from the Baby Boomer generation over the next 20 years.
The great wealth transfer is expected to make millennials the richest generation in American history.2
In the face of these changing demographics and client expectations, wealth managers are under pressure to transform and deliver personalized, seamless and omni-channel experiences. Competition is fierce, not only from incumbents who are racing to innovate but also new digital-only players and robo-advisors. In the 5 years to 2021 digital-direct wealth managers captured approximately 41% of total industry net flows3 – and this trend is only likely to increase.
To thrive in this environment, firms must focus on innovation, growth, operational efficiency, and client-centricity. Decision intelligence is instrumental in achieving these objectives by enabling firms to harness the full potential of their data assets.
Decision intelligence is driving profitable growth for wealth management firms
Wealth management firms have increased their investments in data and technology in recent years, but continue to struggle to harness the full power of the data available to them. Decision intelligence enables wealth managers to integrate a vast array of data, including structured, unstructured, internal and external data, providing actionable insights that are embedded in operational and strategic decisions. By leveraging decision intelligence, wealth management firms can better understand client needs, predict and respond to market trends, drive proactive, meaningful client and prospect engagement and deliver better experiences.
1. Creating a trusted, contextual data foundation
One of the key strengths of decision intelligence is its ability to integrate and analyze data from diverse sources. Wealth management firms have access to vast amounts of internal data, including client portfolios, transaction histories, and risk profiles. However, external data – such as wealth profiles, news, market events, company filings, economic indicators and social sentiment – can also provide valuable insights.
By connecting these data sources, decision intelligence enables firms to create a 360-degree view of the client, which is critical for delivering personalized services and identifying new opportunities. For example, decision intelligence can help wealth managers predict shifts in client behavior based on changes in the macroeconomic environment, allowing them to proactively adjust strategies and offer tailored advice.
Decision intelligence also drives operational efficiency by automating and augmenting decision-making, enhancing digital capabilities, and reducing the manual effort associated with data aggregation and processing. Additionally, it unlocks the potential of Generative AI by providing a trusted, contextual data foundation to ground large language models. According to McKinsey estimates, Gen AI alone could help the average wealth adviser reorient 20 to 30 percent of their time toward growth-related tasks4.
A truly future-proof data and technology infrastructure will enable wealth managers to deliver coherent real-time, single-client views; seamless client journeys; and consistent omnichannel experiences which are supported by responsible AI, data and cyber risk, and hybrid cloud architectures. It will also ensure firms are ready to capitalize on future market, technological and regulatory developments, facilitating faster growth as well as sustainable increases in profitability.5
2. Accelerating organic growth
Bold new strategies are needed to accelerate growth in a market that has struggled for organic growth in recent years. Decision intelligence provides the platform for a new era of data-driven growth.
The challenge is to make client acquisition and development more systematic and to formulate more informed predictions about potential avenues for growth.6
For example, the identification of centers of influence enables advisors to focus on forming high value relationships with the accountants, legal advisors, philanthropy consultants and other third parties to aid in referrals of new business. Decision intelligence enables the systematic identification of centers of influence at scale by connecting disparate data into relationship graphs and providing prompts for engagement.
Many wealth managers are also placing more focus on addressing the significant untapped potential in adjacent business lines – for example workplace solutions, corporate and investment banking, and retail banking. Decision intelligence is helping organisations overcome the challenges associated with connecting data across these divisions, providing a unified platform to identify and prioritize opportunities.
Bank-owned wealth managers, which have historically relied on in-branch referrals, are increasingly deploying sophisticated marketing techniques and analytics to increase top-of-funnel conversion.7
A combination of increasing data availability and developments in AI and machine learning is enabling firms to use decision intelligence to better predict future wealth, allowing earlier engagement with, for example, entrepreneurs and professionals to form strong and long-lasting relationships.
3. Unlocking value from mergers and acquisitions
Bain has determined that there’s a $250 billion growth opportunity in wealth management by 2030 and that scale M&A will play a critical role as the largest players will outpace the market and be able to invest in the analytical capabilities to offer differentiated services.8
Consolidation, product diversification and succession planning are some of the factors already driving deal activity in the sector, with 79 deals announced in the first quarter of 2024.9
Decision intelligence can help these organizations ensure efficient integrations and accelerate the delivery of benefits, by providing a shared platform to integrate diverse data systems, uncover new insights and quickly identify and prioritize growth opportunities.
4. Enhancing client and colleague experience
It takes the acquisition of 3 new customers to make up for one lost customer, according to McKinsey10, so the ability to firms to deliver exceptional experiences, build loyalty and retain profitable business remains critical – particularly given clients’ increasing taste for switching, with 44% of wealth management clients planning to switch, add a new provider or move assets in the next 3 years11.
Decision intelligence allows organisations to build a deeper and more dynamic understanding of their customers and their behaviors, triggering personalized and timely outreach to increase loyalty and build deep, long-lasting relationships.
For colleagues, decision intelligence provides tools and insights that makes their work more efficient and rewarding, creating a motivated and productive workforce, improving employee retention and helping to attract new talent.
Unlocking the future of wealth management
In an industry where data is the new currency, decision intelligence is rapidly becoming a cornerstone of competitive strategy in wealth management. By connecting internal and external data, unlocking operational efficiencies, uncovering organic growth opportunities, accelerating benefits from M&A, and enhancing both client and colleague experiences, decision intelligence is enabling firms to drive profitable growth in a highly competitive market.
As the wealth management landscape continues to evolve, firms that embrace decision intelligence will be better equipped to navigate uncertainty, capitalize on opportunities, and deliver superior value to their clients and shareholders. The future of wealth management is data-driven, and decision intelligence is the key to unlocking its full potential.
References
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