Is hyper-personalisation the future of wealth management?

This developing technology provides wealth managers with the ability to provide a personalised service to clients. But hyper-personalisation has its drawbacks 


Competition is increasing in the wealth management sector. According to a recent survey by Netwealth, a technology-powered wealth manager, a third of wealth manager clients are considering switching to another provider – and it’s the best-off who are the most discontented. Now, a growing number of managers are using hyper-personalisation to improve their offerings and cement client relationships. 

Using technologies such as artificial intelligence, data analytics and automation, hyper-personalisation allows wealth managers to streamline portfolio management and make those portfolios more relevant to the exact needs of the client. In the same way that Netflix serves up a different choice of programmes and movies for each customer, based on what it already knows about them from their previous choices, hyper-personalisation can take into account a client’s investment goals, income and life situation and more specifically their interest in, for example, ESG investing and emerging markets.

Alongside this, behavioural science and sentiment analysis mean that wealth managers can now define the exact risk profile of each client more accurately. Younger savers expect to have the ability to track their investments whenever and wherever they want, using almost any connected device. Advocates of hyper-personalisation say that its ability to create bespoke investment options can also build trust, which makes it easier to improve client retention and manage intergenerational wealth planning.

In a recent survey carried out by Forbes Insights and banking software provider Temenos, 82% of respondents said that wealth managers who adopt hyper-personalisation are more likely to succeed than those who don’t. And 45% of those who took part in the survey said that this technology would change their financial guidance. Many wealth managers are aware that tech giants are speeding ahead with developing and adopting the new technology – and they don’t want to be left behind. 

Markets that continue to be dominated by mutual funds are inherently less able to support true personalisation

Typical of these new providers is Addepar, which was founded because of concern over transparency following the 2008 financial crisis. With more than 700 wealth managers handling a total of $3tn (£2.38tn) of assets on its platform, it presents a client’s entire relevant information on an integrated dashboard. It pulls in data from various sources, verifies then integrates it, allowing the wealth manager to present clients with accurate and personalised options. The aim is to have a conversation with clients and develop a narrative – not just to show them graphs and statistics. 

Yet preparedness for this ongoing shift differs among regions, according to Russell Andrews, global head of advice solutions at SEI Asset Management Distribution. 

“Markets that continue to be dominated by mutual funds are inherently less able to support true personalisation at an asset management level. They rely on engagement to meet the need,” he says. “But evolved markets, which already embrace separately managed accounts and other more sophisticated implementation models, have an existing infrastructure better equipped to apply portfolio personalisation.”

At a minimum, wealth managers need to start personalising their offering beyond generic products and services. At best, irrelevant offerings and advice will annoy clients. At worst, and as regulations continue to be tightened, they might lead to allegations of mis-selling.

In the absence of an obvious standard solution in the past, many wealth managers have been building their own, says Jay Venkateswaran, business unit head, banking and financial services at business process management company WNS.

“If you look across the top 15 wealth managers, they probably have 15 different solutions,” he says. “As well as adding their branding, this allows each wealth manager to tell a particular story to their client. These tools give them the ability to tailor that conversation and go beyond looking at charts to provide insights and explore scenarios. For instance, they can show a client what will happen to them if they stop working at a specific age or if they decide to change their investment strategy.”

Increasingly, hyper-personalisation allows clients of wealth managers to model these different scenarios themselves. However, many wealth managers are still not exploiting the full potential of the technology to cross-sell – and upsell. This is partly because extensive M&A in the sector means that legacy systems haven’t been integrated. “Many wealth managers miss a trick because they haven’t identified that a client might benefit from an insurance product or that a mortgage customer might have extensive savings,” says Venkateswaran. “As well as improved integration of technologies, better data analytics are needed to help asset managers service clients better – and to improve their sales.”

One potential mistake, says Andrews, which is not exclusive to asset managers, is to build a solution that nobody wants, understands or values. “Asset managers have significant intellectual property and expertise in navigating investment markets and managing portfolios,” he says. “That doesn’t necessarily translate automatically into solutions that meet the needs of advisers and end-investors.”

There are other challenges. Hyper-personalisation relies on large amounts of data – the more of it that the wealth manager has, the more personalised their offer. But data privacy continues to be a controversial issue. At the higher and therefore more profitable end of the market, an added complication is that high net worth individuals are likely to have assets in different jurisdictions, each of which might have its own regulatory requirements, especially if not governed by GDPR or adequacy decisions.

“It’s critical to work hard to understand the exact personalisation needs of advisers and investors for today and the future,” Andrews says. And then, find the right innovative solutions to deliver them.