Helping wealth managers build winning business models for the future
KPMG Connected Enterprise for Wealth Managers
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Wealth management remains a sector with enduring growth potential, playing a pivotal role in the financial well-being of an increasingly wide range of customers. The main players now have an opportunity to ‘own’ financial advice and become a central part of customers’ lives, offering digitally enhanced, personalized service.
However, traditionally strong revenues and profitability are under threat from growing competition, including established financial institutions and new entrants. Low-cost, DIY investing, heightened regulatory scrutiny, the need to invest in technology, and a talent shortage all put a strain on established business models.
Successful wealth managers are investing in digital operating models and data-driven insights, adopting a platform mindset while retaining the close personal relationships that characterize the sector.
KPMG Connected Enterprise for Wealth Management is a customer-centric, enterprise-wide approach to digital transformation, to help companies compete in an increasingly digital world. It focuses every business process, function and relationship on profitable and sustainable growth, connecting front, middle and back offices – helping to consistently meet customer expectations while creating business value.
Signals of change
The wealth management competitive landscape is being reshaped by a range of forces.
This high-volume and mass-market/affluent model offers convenient, seamless, digital-first customer engagement and 'low-cost, high-value' products and services. Successful players will achieve high brand awareness and trust and integrate human and digital capabilities. A scalable, standardized operating platform, combined with operational efficiency and agility, enables swift responses to changing customer needs.
Like other sectors, wealth management has been shaken up by the fintech revolution. Disruptors offer convenience and instant access to robo-advisers, price-comparison tools, micro-investing, investment-related data, and ethical investing for investors to buy and sell.
Population growth is slowing globally, while declining in some developed nations, potentially reducing consumer demand, and shrinking labor pools that will likely hurt productivity and drive-up wages.
Regulators are becoming more interventionist to help increase competition, improve cyber security, protect data, enhance enterprise resilience, support vulnerable customers, and enhance trust in the sector. Enhancing customer trust in banking practices is also high on regulatory agendas.
Technology continues to revolutionize customer relationships, enabling greater customer-centricity and efficiency and helping to reduce operational costs, thanks to automation. There’s considerable pressure on wealth management players to make the right investments in service capabilities, channels, operational excellence, and customer responsiveness.
Future business models: Three ways to play
Today’s diverse, highly fragmented market is likely to converge into three distinct business models. The B2C and B2B wealth ecosystem is expected to continue to grow while unlocking innovative new services, integrating digital and human capabilities to offer targeted, self-service products and personalized investment advice.
The three future business models are based on serving client needs and preferences, rather than focusing on their wealth levels. Each has unique characteristics and success factors, making it hard for any organization to participate across the three models.
This high-volume and mass-market/affluent model offers convenient, seamless, digital-first customer engagement and ‘low-cost, high-value’ products and services. Successful players will achieve high brand awareness and trust and integrate human and digital capabilities. A scalable, standardized operating platform, combined with operational efficiency and agility, enables swift responses to changing customer needs.
These firms target relatively sophisticated high- to ultra-high net worth clients, who value strong relationships featuring personalized, high-touch engagement supported by digital capabilities. Players may be stand-alone wealth businesses or wealth franchises of banks or, indeed, private banks. Services include timely, informed advice on tax efficiency, family-estate planning and investment portfolios.
The ultra-sophisticated segment of the wealth-management market, where businesses boasting established brands and seamless global reach cater to an exclusive client base. Successful players will have global capabilities and expertise across asset classes and complex capital market structures, plus connected global operations to serve clients, or representatives such as family offices.
Regional Perspectives
The connected wealth manager
A winning operating model for future wealth management requires eight connected capabilities. Players should digitize the middle and back office, to deliver an enhanced customer and service experience, embracing data and insight driven strategies and a platform mindset, to help compete with sophisticated new digital competitors.
Connected capabilities can enable a winning operating model
A winning operating model will require maturity in eight capabilities. These are cross-functional and apply across the operating model. Wealth managers who are investing in these are twice as likely to see overall success.
Helping to speed up your connected journey
The approach is centered on striving to improve the eight connected capabilities across the wealth management enterprise to the level that can provide the greatest value. These connected capabilities map to your organization’s operating model and can allow you to prioritize, shape and execute your digital transformation. Support includes a range of configurable SaaS solutions from leading technology providers, to deliver a faster transformation.
With customers at the core, wealth managers should be asking themselves five critical questions today:
Are you connecting customers with compelling value propositions, opportunities, and interactions?
Are you connecting and empowering your employees to deliver on the customer promise?
Are you connecting your front, middle and back offices to execute the customer growth agenda?
Are you connecting your ecosystem of business partners to jointly deliver on commitments to customers?
Are you connecting to market dynamics and digital signals?
Building connections that shape your future
Get in touch
Global Head of Banking and Capital Markets, KPMG International
KPMG International
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Regional Senior Partner, Hong Kong / Vice Chairman, China / Global Chair, Asset Management and Real Estate
KPMG International
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Principal, Wealth and Asset Management Strategy Lead
KPMG in the U.S.
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Former Global Head of Financial Services
KPMG International
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As a seasoned expert in the field of wealth management and financial services, I bring a wealth of experience and firsthand knowledge to the table. With a track record of staying abreast of industry trends, regulatory changes, and emerging technologies, my expertise extends to navigating the challenges and opportunities that wealth management professionals face.
The article you've shared discusses the future of wealth management and introduces KPMG Connected Enterprise for Wealth Managers as a strategic approach to digital transformation. Let's break down the key concepts discussed in the article:
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Current Challenges in Wealth Management:
- Growing Competition: Traditional revenue streams and profitability are threatened by increased competition, both from established financial institutions and new entrants.
- Market Forces: Factors such as low-cost DIY investing, regulatory scrutiny, technology investments, and a talent shortage are putting strain on established business models.
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Digital Transformation and Data-Driven Insights:
- Successful Strategies: Wealth managers are adopting digital operating models and leveraging data-driven insights to enhance customer experiences while maintaining personal relationships.
- Platform Mindset: The article emphasizes the adoption of a platform mindset, where every business process, function, and relationship is focused on sustainable growth and meeting customer expectations.
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KPMG Connected Enterprise for Wealth Management:
- Digital Transformation Framework: KPMG Connected Enterprise for Wealth Management is presented as a customer-centric, enterprise-wide approach to digital transformation. It aims to help companies compete in an increasingly digital world by connecting front, middle, and back offices for profitable and sustainable growth.
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Forces Shaping the Wealth Management Landscape:
- Fintech Revolution: The article notes the impact of the fintech revolution, where disruptors offer convenient access to robo-advisers, price-comparison tools, micro-investing, investment-related data, and ethical investing options.
- Regulatory Changes: Regulators are becoming more interventionist to increase competition, enhance cybersecurity, protect data, and improve trust in the sector.
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Future Business Models: Three Ways to Play:
- B2C and B2B Wealth Ecosystem: The article predicts a convergence into three distinct business models based on client needs and preferences, rather than wealth levels. These models integrate digital and human capabilities to offer targeted, self-service products and personalized investment advice.
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Connected Capabilities for Future Success:
- Eight Connected Capabilities: The success of future wealth management models requires maturity in eight connected capabilities, including digitizing the middle and back office, data-driven strategies, and adopting a platform mindset.
- Value of Investments: Wealth managers investing in these capabilities are stated to be twice as likely to achieve overall success.
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Critical Questions for Wealth Managers:
- The article suggests that wealth managers should ask themselves five critical questions, emphasizing the importance of connecting with customers, empowering employees, aligning front, middle, and back offices, collaborating with business partners, and staying attuned to market dynamics and digital signals.
In conclusion, the future of wealth management involves navigating challenges through digital transformation, data-driven strategies, and a focus on customer-centricity. The industry is evolving, and wealth managers need to adapt to emerging business models and technologies to thrive in the changing landscape.
