Big banks, big tech, fintech: Shifting dynamics in wealth management

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Becoming the primary adviser for affluent, high-net-worth (HNW), and ultra-high-net-worth (UHNW) clients has been the hallmark of global Wealth Management (WM). Banks, both large and small, global, regional, and local, were once the go-to destinations for all financial needs — from borrowing and saving to investing and transacting. As leaders in WM, banks have played a pivotal role in helping clients safeguard, grow, and transfer their wealth. However, the financial landscape is undergoing a seismic shift, with the emergence of Big Tech and fintech companies as formidable competitors, compelling banks to re-evaluate their strategies.

The changing landscape

The WM landscape is intricate, with various players vying for dominance, changing rapidly. Big Tech companies leverage vast user bases and advanced technology, offering personalized financial solutions. While excelling in transactional services, providing sophisticated advisor services for HNW clients presents regulatory challenges. Traditional banks possess brand recognition and trust but grapple with legacy technology, hindering their agility. To echo a sentiment from a senior leader at a major bank, “We have a client base to die for and technology that kills us.” Fintech firms, born from innovation, have globally disrupted banking, offering specialized services with cost-efficiency and user ease. They address mega-trends such as ESG investments, cryptocurrencies, and Islamic banking through innovative solutions.

Fintech’s response to mega-trends: Fintechs, catalyzed by the 2009 global financial crisis, have been instrumental in reshaping the banking industry globally.

ESG Investment: Fintech firms actively engage in ESG investments, evaluating ratings, monitoring environmental impact, and facilitating carbon offset trading. They leverage technology to create green financial products, contributing to sustainable finance.

Cryptocurrencies: Fintech firms facilitate cryptocurrency adoption through user-friendly digital wallets, payment processors, Bitcoin ATMs, and investment platforms. Their agility in adopting blockchain technology drives the increasing use of digital currencies.

Islamic banking: In Islamic finance, fintech innovations such as Sharia-compliant digital banks and blockchain applications reshape the landscape. These solutions adhere to Sharia principles, offering convenience to customers while ensuring compliance with Islamic finance rules.

Big Tech: Big Tech’s scale and detailed customer data allow basic banking services. Future possibilities include Apple Bank, and Amazon Bank, challenging large banks globally, especially in the HNW space.

Enhancing the client experience

Offering an unparalleled client experience is key to retaining clients in this competitive landscape. Fintech has integrated seamlessly into WM solutions, yet traditional banks maintain their dominance due to the need for personalized advice. Complex portfolios, global investments, and multi-jurisdictional legal requirements necessitate tailored solutions and expert guidance. Robust Chief Investment Officer (CIO) offices, experienced Relationship Managers (RMs), and specialized teams are indispensable in addressing clients’ unique needs. Traditional banks are increasingly investing in technology to enhance their digital offerings, focusing on user-friendly interfaces and seamless experiences.

Cooperation amid competition: While competition intensifies, collaboration is becoming prevalent. Established banks are forming partnerships with fintech firms to enhance digital capabilities, expand services, and reach a broader customer base. Fintech companies benefit from these partnerships, gaining access to established banks’ resources, fostering innovation, and improving client experiences. In the Mena region, Dubai leads the way in initiating fintech firms, with banks investing in digital services for their clients.

Looking ahead: The financial services industry’s future lies in seamlessly integrating technology, tailored solutions, and expert guidance. Banks must embrace the nimbleness and simplicity of fintech while ensuring optimal client engagement. Exceptional Client Experience (ECX) must be at the core of every interaction, akin to service standards set by renowned companies like Ritz Carlton, Disney, Emirates, Amazon, and Google. Banks often enlist professionals from these firms to train their frontline and management staff in delivering exceptional client service. With $60T+ transitioning from baby boomers to digitally savvy, values-centered (like ESG), and cost-conscious (like ETFs) millennials and Gen Z, banks must evolve. Success lies in amalgamating fintech agility, Big Tech innovation, and traditional banking expertise. By embracing these traits, banks can continue to be primary advisors to their clients, fostering trust, loyalty, and lasting relationships in this dynamic and competitive landscape.

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