Wealth management transformation: Not just a destination

Transcript

[music]

Karen Dumville: [00:00:00] Hello, everyone. I'm Karen Dumville, your host for today's episode. Today, I'm joined by Omar Bashir, Technical Director for Financial Services at ThoughtWorks. Opportunity awaits the wealth management industry as global wealth rises and the baby boomer generation begins to transfer assets. Omar says, wealth managers must keep up with growing demands for efficiency and personalization.

This large-scale digital transformation is not a destination. It's a continuous journey and in this episode, we are going to explore this topic in more detail. Welcome today, Omar. Thank you for joining us.

[00:00:39] Omar Bashir: Hi, Karen. Thank you very much for having me.

[00:00:42] Karen: Just to get started, before we dive in and begin talking about wealth management, can you tell us a little bit about yourself and the role you have at Thoughtworks?

[00:00:50] Omar: Sure. I am the technical director for banking and financial services in the APAC region for Thoughtworks. I have been with Thoughtworks for nearly 4.5 years and I have been in Singapore for about eight months now. Prior to that I was with Thoughtworks in London, where I was again working at the intersection of our enterprise modernization service line and the banking and financial services vertical.

Prior to joining Thoughtworks, I spent about 15 years in the financial services industry in London, largely working for capital markets firms. A lot of that experience was on legacy modernization, cloud adoption, and mainframe offloading.

[00:01:35] Karen: So well qualified to speak on the topics that we have for you today. What are some of the biggest challenges we're seeing across the wealth management industry at the moment?

[00:01:45] Omar: One of the biggest challenges that we are observing is what we call the generational wealth transfer. The baby boomers' wealth has been transitioned on to the newer generation, the millennials and the Gen Z's. What we are seeing is that their expectations on what they expect from wealth management firms is very different from what their parents or their ancestors had.

They are essentially looking at a very low friction between them and their finances or their wealth. From that perspective, they are quite keen on self-service. Personalization is quite an important aspect for them. They need to be able to have the access to the right information and insights so that they're able to make decisions quickly. Again, be able to act in a timely manner and to be able to seek the advice of an advisor as and when they need it.

All those things are putting a lot of pressure on the wealth management industry as a whole and wealth management firms on how to balance all these things and provide more personalizable experience, which is the right balance between self-service and human advice where possible and all with the insights, and the information, and the data that they need to make their decisions in a timely manner.

[00:03:31] Karen: Based on some of these trends or challenges, what are you seeing changing in the industry to take account of some of these things?

[00:03:41] Omar: First and foremost is a lot of reliance on data. Wealth management was always reliant on data, but more recently, what we are seeing is that with the advancements that are happening in artificial intelligence, specifically in GenAI, the advisors have new tools that they can use to augment the service that they provide and the tasks that they do.

At the same time, these tools can not work in isolation. They work within the ecosystem that is provided, so the data on the platforms need to be consumable by these tools. It first needs to be available. Then, it needs to be of the right quality. The platforms on which these tools actually sit, those platforms need to be stable, and they need to have the right interfacing mechanisms so that these tools could be used over there.

The readiness of the wealth management firms to be able to advance forward and provide those experiences that their customers now desire or the expectations that they have to fulfill these expectations, that readiness is not there for many firms. It's quite a challenge for some of them to actually come to that stage, where they can be seen as being provided, A, those experiences and B, being able to use those new technologies to build that competitive edge that they can use to be able to succeed in the business.

[00:05:28] Karen: You mentioned earlier, obviously, you've recently moved to Singapore from London. Are you seeing that the changes are different across countries, continents?

[00:05:41] Omar: Yes, there are subtle differences. The overall challenges are remaining to be the same. The overall thing that I mentioned about there, we all work hard for our money and we all would like to have very low friction or fewer barriers between us and our finances, especially when we invest in wealth management. That is us entrusting our hard earned money to somebody else and trusting in their promise to be able to deliver value on our investments.

Not everybody has the same level of emotional self-management to be able to deal with a certain situation, so people like to in general, have low barriers, low friction towards being able to see how their investments are progressing forward. From that perspective, providing the ability for people to be able to view their investment, see how they are performing, what opportunities exist, it is paramount, and that's global. That's everywhere.

The differences come in where there are certain cultural nuances, and the investments people need to make or would like to make. Those are the key differences that we see over here. From a technology perspective and as well as a business perspective, it's fairly similar, what's happening in the industry.

[00:07:34] Karen: Thank you for that. Understandably, you wouldn't be able to mention names due to privacy or competitive reasons, but can you give any examples of where wealth management firms are currently outperforming the competition and what they might be doing differently?

[00:07:51] Omar: Yes, we have seen examples of firms who are doing much better than others. Some of the key things that they're looking at is not just the products and services that they offer and the compelling nature of those products and services, but also the customer life cycle and the customer journeys within those customer life cycles. Reducing, again, the friction between them from the point where they joined the firm to the point where they start investing, and also having the visibility and transparency of how their investments are performing in the market environment and being able to react to those changes.

A recent example that I have seen of a Canadian wealth management firm where they actually reduced their onboarding time of customers from two weeks to 24 minutes had a huge uptick in the number of customers actually onboarding and investing with them. It also improved the efficiency internally within the organization, where before, their staff had to review up to 200 pages of documentation. Now, a lot of the information is digitized, and it is processed automatically.

That's one aspect. The other aspect is being able to provide those compelling products and being able to provide the advice. We have had in the past years tools like robo-advisors providing the advice to different customers. Their performance had been questionable. Many firms are now using such automated tools to augment the advisors rather than working on their own.

They are seeing their performance also improving. At the same time, we have to also understand that for these firms to progress and to perform better, they also need to ensure that their foundations are strong. When I say the foundations are strong, as I mentioned before, they need to have the right data with the right quantity available at the right time to be able to make those decisions and get the insights and also, at the same time, they need to be sitting on platforms which are secure, resilient, and performant.

If you don't have the foundations right, then none of these things that I've mentioned before can be achieved. The firms that are doing better, looking at the customer journeys, looking at the compelling nature of the products, and also investing heavily in ensuring that they have the right foundation to follow the platforms and the data that they need.

[00:10:43] Karen: Thank you, Omar. Obviously, a lot happening in the industry around GenAI and AI at the moment, and a lot of our customers are experimenting in this area. How do you see some of the wealth management firms starting to think about GenAI and AI? What have you seen so far?

[00:11:05] Omar: In terms of GenAI, because it is more conversational in nature so a lot of initial experiments that the firms have been doing and where they have put GenAI and AI into practice has been in customer advice or as chatbots to be able to respond to customer queries but that's not the only place where GenAI and AI can be used. Especially GenAI has a huge promise in understanding a customer's requirement and being able to suggest how their portfolio can be optimized as well as at the same time offer bespoke products to the customers if they so require for their investments.

Now, here comes the interesting part because we all know that GenAI has the ability to hallucinate and there is always a possibility that people will not trust the advice that GenAI is giving, or the advice that GenAI gives it may not be the right advice in a certain context or in a certain environment. The interesting thing over here is that whatever advice GenAI gives as far as investment is concerned, how can we take that advice and test it using the conventional technology to be able to validate and verify that that advice is sound and is valid?

For example, if I put in a query about a particular investment opportunity or a product or give my investment goals to a chatbot, based on my investment goals, if the chatbot comes up with a portfolio or a product the chatbot should be able to simulate that product under varying market conditions using conventional prices or simulators, and also be able to tell me how these products or these portfolios are going to operate in different market conditions.

That way I will have a lot more confidence than simply a chatbot responding to me by this product or optimize your portfolio in this manner. It can come back and say, here are three or four options. You haven't optimized your portfolio? For every option, this is how the portfolio is going to behave in varying market conditions. I'd have a lot more intelligence and insight given to me by such tools to make decisions.

There lies a lot of opportunities for GenAI being used, but then again, as I mentioned before, your large language models or artificial intelligence needs continuous data to be able to continue to learn from that data. Once I select a particular investment that has been offered by my chatbot, then how that option performs under varying market conditions, it is important for that chatbot to continue to learn or the language models underneath continue to learn as to how my choice behaved subsequently, so that when another customer asks for or presents a similar sorts of a problem for the chatbot, it makes a much better, more informed decision and gives better options to those customers.

Again, when quality of data and the ability to have that data in a timely manner for these tools to learn from and adapt is very, very essential.

[00:15:08] Karen: That makes a lot of sense. From your experience, what are the most common barriers wealth management firms are facing when trying to embark on a transformation journey?

[00:15:20] Omar: The biggest challenge these wealth management firms are facing are complex legacy systems. Then being able to modernize is challenging when you are dealing with a lot of tightly coupled technology that you have. Essentially, if you want to go through a journey of digital transformation, you are basically going through or trying to achieve a state where you'll be in a mode of perpetual optimization.

To have that ability to perpetually optimize your technology needs to be flexible, it needs to be adaptable. If you are looking at legacy technology and trying to achieve that state of perpetual optimization, your legacy technology is going to be anchoring you back because change would require-- or the ability to experiment and adapt would require a huge amount of effort with your legacy technology.

First and foremost challenge that they have is how do they break or decompose their legacy technology into more modular decoupled components on top of which they can experiment fast and be able to adapt quicker. Then the second big challenge that we are looking at is poor quality of data or the inaccessibility of data. That also comes down to very tightly linked with your legacy systems because in your legacy system, the data was tightly covered. As systems were tightly covered, the data was also tightly covered.

To be able to extract the data that you need is quite challenging and requires a lot of effort and time. In many cases, this data is without the right governance and the validation and controls on top of that data, a lot of this data is in a questionable quality. If you have data in questionable quality, the insights will also be questionable. Last but not least, you have regulations that have been implemented in a very, very prescriptive manner and they have been implemented in their net and that also keeps EU restricted from transforming in a very efficient manner.

Once you have figured out how you are going to transform your legacy technology and improve the quality of your data, you need to get your teams on board, get them to understand the difference between digitization and digital transformation, and get them to understand that it's not just about automating the processes that you have right now, but also optimizing and simplifying the processes that you need in your target architecture so that you are able to continuously improve not just your own internal operations, but the customer experience that you're providing.

[00:18:20] Karen: Is it even possible for wealth management firms to undergo a fast transformation given the many constraints and regulations in the industry?

[00:18:30] Omar: That is a very interesting question. If you want to move fast, you need to first of all, figure out what your goalposts are, what your priorities are. It's all a question of prioritization. What gives you the maximum value? What change provides you the maximum value? Then how to deliver that change or execute that change in an incremental manner, in a way where you are able to assess that you're going in the right direction.

The key thing that we keep advising our customers who are going through legacy modernization or a digital transformation journey is first of all to try and understand what is the whole scope of your transformation. Once you have the scope, then start thinking about within that scope, what are the capabilities or the products or the features that you have are not providing you with the value that you need.

You can always deprioritize them because they're giving you diminishing returns. By deprioritizing them, you are focusing on the capabilities, the products, the features, and the services that are giving you the most value. By prioritizing those, you're able to able to deliver more impactful value to your business as well as to your customers. Then once you have that priority order, then in that the way you implement this is in small incremental slices, and with every slice you are able to measure if you're going in the right direction, if you're achieving the outcomes or you're heading towards the outcomes that you wish to achieve.

Based on those measurements, you are able to then adapt as to how the subsequent slices need to be delivered or which subsequent slices need to be delivered. There is a method to the madness of successful transformation, and it's about scoping and delivering in increments. If you're not able to prioritize or if you're not able to deliver in increments, the challenge that you have is that you will be delivering with very low visibility or you'll be executing transformation with very low visibility for yourself as well as for your business in how that program is progressing.

The key risk over there is that without substantial business-aligned progress delivered to, or reported to the business, the business may lose the motivation to continue with that program because they're not seeing any value in it. When they lose the motivation in continuing with that program, they may withdraw the funding after a certain point in time and that means that that program may be prematurely terminated.

That can lead to fragmented technology, and once you have fragmented technology, you'll have fragmented operating models and business processes, and that would lead to much more friction in operating your business. It would lead to higher costs and higher risk. 

When we're talking about delivering transformation faster, it's not just about the speed, it's also about the stickiness of digital transformation, and stickiness of digital transformation, as I mentioned before is about having that ability to continuously optimize and improve as I mentioned before, that it's not a destination, it's a continuous journey, and your technology and your operating model should help you focus on your outcomes.

Those outcomes should be guided by meaningful metrics all along the way. Wealth management and financial services being a highly regulated industry, regulatory compliance is necessary, and for many firms, regulatory compliance is a huge overhead. Regulatory compliance can be automated as much as possible and if you're able to automate that regulatory compliance, what we'll achieve is consistent and faster compliance.

As a result of that, you will have much lesser overheads in meeting your obligations and a lot more time and resources to focus on business development.

[music]

Host: Great. Thank you. Wanted to say thank you very much for your time with us today, Omar, and thanks to our listeners for joining us for this episode of Pragmatism in Practice. If you'd like to listen to similar podcasts, please visit us at thoughtworks.com/podcasts, or if you enjoyed the show, help spread the word by rating us on your preferred podcast platform.