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Technology opens up new channels to market for wholesale investment managers

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Looking to expand their reach and market share, wholesale fund managers are turning to the retail market as an attractive way to fuel their growth ambitions. While the global HNWI population and wealth continues to grow (6.3% and 7.6% increase respectively), the retail market has experienced a massive boom thanks to technology and the pandemic.

In fact, the pandemic was such a big influence, that experts have even come up with a demographic term for first time retail investors who joined during the pandemic – Generation Investor. Instead of being categorised by their birth year or life stage, they are grouped together because they all started their investing journey during the start of the pandemic. With a median age of 35, these investors are more bullish than investors who started trading before 2020.

And it seems that everyone wants a slice of the pie. While it’s difficult to pin down the total number of retail accounts globally, there are a few numbers we can use to help paint a picture:

  • In the US alone, data from the top 6 online brokerages combined reveal that there is an astonishing 100 million retail accounts/users.
  • Two of the top retail-focused brokerages, Fidelity and Schwab, had US$8.8 trillion and US$6.8 trillionin client assets at the end of 2019, with Schwab indicating a 66% increase from the year earlier.
  • JMP Securitiesestimates that the brokerage industry in America added roughly 10 million new clients in 2020.
  • Closer to home, there are close to 400 000retail users on the Sharesies platform. With a population of 5 million people, this represents a growing percentage of the Kiwi population.

 The value that retail investors hold for wholesale managers

 It goes without saying that without the advances of technology, we wouldn’t be seeing this type of growth for retail investors. What was once considered as the quirky sideshow for a select few investors, technology has created a new breed of retail traders – more enthusiastic and impactful than ever before.

With 44% of Generation Investors indicating that they were buying and selling for the short term in 2020, this number dropped to 21% in 2021. These investors are becoming more educated and interested in building their wealth over time, and are therefore a more viable segment for wholesale providers to tap into.

The sheer scale of this segment, combined with efficient technology to attract, retain and service them – no wonder wholesale providers are offsetting the initial smaller balances for the future potential this segment holds. While wholesale investors will always be the focus, technology opens up the doors for these companies to diversify their offerings and appeal to a wider audience.

HNWI are demanding better experiences too

 With the effects of Covid-19 continuing to drag on, digital channels have become investors’ main engagement platform of choice – but providers are falling short. In a recent survey by CapGemini, only 33% of wealth management firms are mature in their capabilities when it comes to front-end digital customer experiences.

And this is echoed in investors’ responses. In the same report, 47% of HNWI under the age of 40 are not satisfied with their firm’s digital offering. As older HNWI start to transfer their wealth to the next generation, the next wave of HNWIs are more tech-savvy and trusting of digital processes than their predecessors.

With a completely different set of priorities, the next wave of HNWIs are demanding more personalized experiences that are tailored to their unique lifestyle and preferences. For example, 50% of HNWI under the age of 40 would like the option to select purely robo-advice from their wealth provider, compared to just 39% of total HNWIs.

Key touchpoints to focus on include personalised updates about new products or services,or receiving additional market information, with more than 40% of HNWI indicating that this will improve their overall perception of the provider. Artificial intelligence, backed by powerful data analytics is critical to addressing the needs of this segment.

Wealthtech is driving efficiencies for wholesale providers

 To effectively implement some of the technologies and capabilities mentioned above, FSP’s will need a robust system that is flexible enough to layer on technology as needed. Market requirements and technology advances are happening at a rapid pace, and cumbersome legacy systems will become a massive barrier to driving innovation within organisations.

Traditionally, wholesale onboarding and AML processes have been an administrative nightmare for providers, often taking weeks, sometimes months, to process an application. It is now possible to automate and streamline many of these processes, which not only reduces the time and cost of acquisition, but also improves the overall customer experience.

Through digital tools, the wholesale investor certification process has been transformed into a simple online process flow that can be completed in a matter of minutes. Intelligent workflows can guide the applicant through a series of questions, with built-in biometrics to help validate identity and  counteract fraud.

From a compliance point-of-view, record keeping becomes a breeze. Client details are automatically validated and stored, while intelligent workflows ensure that client details are current and adhere to the latest compliance requirements.

Both HNWI and retail investors alike expect a higher level of digital functionality and engagement from their providers, so a client portal is an essential tool to keep exciting, delighting and educating your investors. Investment dashboards provide easy to understand, graphical visualisation of investments at a glance, while updates, regular newsletters and other information can be delivered via the portal to improve communication.

It also provides secure access to transaction and distribution information, and makes it easy to increase the value of each client by promoting and cross-selling into other funds through the portal. By adding in online payment functionality, clients are able to make repeat investments on-demand.

Solutions for wholesale providers

Technology and workflows built for wholesale investors are significantly reducing the cost of acquisition. When combined with retail functionality, these solutions are enabling wholesale investment managers to access new channels to market, by providing the necessary tools to cost effectively enter the retail market.

The Invsta solutions provide a truly immersive investment experience that allows you to digitally attract, onboard and service a diverse range of customers, from retail investors through to wholesale investors. Empower your customers, simplify the investment process and drive a customer-centric and agile fund management business.

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