10 tips for banks bridging the digital divide in wealth management
After watching digital advice grow into a category potentially worth trillions of dollars, banks are determined to protect their existing customer bases from advances made by upstart fintechs and established wealth management firms.

At the In|Vest conference held last week in New York by SourceMedia, representatives of large and small banks came together to share strategies on how the industry can develop its digital channels and unite retail banking and wealth management — businesses which traditionally have operated separately.

Of course, bringing together the two units has created a number of challenges for institutions, particularly in product innovation, customer retention and technology investment. Many executive presentations sought to identify steps banks can take to overcome them.

Much attention was given to the need to recognize the role advisory services will play in helping to differentiate banks from one another. Another theme was the importance of keeping product offerings as simple and transparent as possible. Current banking practices were bluntly questioned, as was the premise that banks can rely on customer scale to ward off competitive challenges.

Following are 10 tips for bringing together digital banking and financial advice to make banks more competitive.
Face facts: Advice is king
In the digital era, banks must shift away from a focus on products to advice, numerous speakers said.

First, digital isn’t just a subset of products or services offered by banks and investment firms, but something that is central to how firms must do business now and in the future, said Kelli Keough, global head of digital wealth management for JPMorgan Chase.

Secondly, the quality of advice offered with a service is ultimately what customers will value in any digital experience, Acorns CEO Noah Kerner said. To accommodate that shift, banks can improve how client data is organized and used, said Aite Group's Alois Pirker, research director for Aite Group's wealth management group.

“The best asset you have is data, but it is also the worst treated," Pirker said. “It’s being treated as a byproduct, and we need to be smarter about what we do next.”
Noah Kerner, CEO of Acorns (right), speaking during a session at In|Vest 2018 in New York.
Put people before profits (and products)
A cultural shift may come as banks engage more in digital wealth management.

The one difference between the microinvesting app upstart Acorns and its bank competitors, insisted CEO Noah Kerner (right), was that it puts customers' needs before profits. For instance, Kerner said, his company decided not to offer users active trading, the ability to buy individual stocks or the ability to invest in nontraditional assets like cryptocurrencies. The app wanted to focus on helping people build their wealth safely and transparently, he said.

“Those are things that we won’t do, even though we could make a lot of money doing it,” he said.

The same attitude keeps its ambitions and offerings simple, too, he added. “I’m perennially scared of overwhelming our customers,” Kerner said.
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Consider 'reintermediation'
When advice and wealth management are championed, and underlying financial services and products are considered commodities, what becomes of longtime institutional players?

Industry observers deem custodians, asset managers, record-keepers and fund providers as vulnerable to automation. Repeated survey results (such as those above) note banks and brokerages are demanding lower operational costs through automation. A new strategy being promoted at these companies, executives attending the In|Vest conference said, is one of "reintermediation." It involves identifying existing assets at legacy firms that could be deployed in new roles, or developing new business models such as their own advisory solutions.

Whether that strategy extends to restricting access to crucial data, or scrubbing relationships with firms turned competitors, remains to be seen.
Kelli Keough, Global Head of Digital Wealth Management at JPMorgan Chase, gives opening keynote remarks at In|Vest 2018.
Keep it simple
Kelli Keough, global head of digital wealth management at JPMorgan Chase (above), said customers want digital tools that are easy to use.

“They say, ‘Don’t overwhelm me with financial complexities and jargon,’ ” she said. “We can quickly make someone back away from our industry because they feel it’s inaccessible."

That is one reason JPMorgan focuses on delivering information in a “snackable” way that gives customers small actions that they can take to achieve a financial goal, Keough said. The company relies heavily on data and analytics to provide these personalized, customized digital insights, she said.
Image representing high-end customer service, with a gloved hand holding a bell.
Close-up Of A Person's Hand Ringing Service Bell Hold By Waiter
Meet digital demands of affluent clients
The rich want digital wealth products, too, but the banking industry is currently focused on advice innovation for its smallest clients.

A number of speakers suggested that imbalance has to be corrected. Kelli Keough, global head of digital wealth management for JPMorgan Chase, noted that 73% of high-net-worth individuals say a wealth management firm's digital maturity is “very” or “somewhat” significant in their decision whether to increase assets with the firm.

Kraleigh Woodford, managing director and head of digital client experience at UBS Wealth Management, said wealthy customers are typically not looking for robo-investing services or other digital tools for the mass affluent. Deborah Waters, global head of private bank operations and technology at Citigroup, said that this client base “is most interested in seeing a consolidated view of their wealth."
Mike Sha, co-founder and CEO of SigFig, says banks mistakenly position robos as an "island" separate from other wealth management offerings.
Tend to your fintech relationships
Seeking out fintech partnerships is one way banks are staying current with digital wealth management demands. But banks can help their young partners, too.

SigFig CEO Mike Sha (above) explained how, in the process of developing a digital wealth management product for a client, his firm ran into an issue that required knowledge of how bank branches work. The problem was nobody at the startup had such experience. Luckily, a prominent board member was able to connect Sha with Mike Reed, who after a long career at JPMorgan Chase had recently retired as the company's head of branch sales. Reed eventually agreed to join SigFig to lead branch strategy and integration.
From left: Amber Baldet, co-founder and CEO of Clovyr; Vern Brownell, CEO of D-Wave; Aaron Spradlin, co-Founder & CEO of cleverDome; and Salvatore Cucchiara, head of wealth management technology at Morgan Stanley.
Embrace cutting-edge technologies
As banks look to digital wealth management, they should not dismiss new and emerging technologies because they might seem too complex or lacking use cases, executives heard.

Salvatore Cucchiara, head of wealth management technology at Morgan Stanley, said the bank sees promise in using quantum computing to speed up risk and performance modeling and improve security. Amber Baldet, a former blockchain program lead at JPMorgan Chase and current co-founder and CEO of the blockchain technology startup Clovyr, made a case for blockchain technology to help banks and wealth management firms handle privacy and security issues.
Jeff McMillan of Morgan Stanley speaks at In|Vest Conference
Make AI a high priority
The use of artificial intelligence-powered tools is deemed an essential part of any bank's digital transformation strategy.

AI tools are specifically being touted for their ability to deliver advice to advisers or clients. However, banks note the difficulty in application of the technology. Morgan Stanley is building an AI-powered platform to provide advisers insights on how to handle clients facing psychologically challenging situations, said Jeffrey McMillan, chief analytics and data officer at Morgan Stanley (above left). But since the bank does not record client calls and the daily customer issues financial advisers face are complex, Morgan Stanley has to find experts who can provide detailed answers to questions the bank receives.

Bank of New York Mellon and Fidelity also explained why they have used AI only after proving it was needed.
Crowd of anonymous, blurred people.
Don't assume your customers will stick around
The common refrain from banks when confronted by the challenge of digital disruption is that they have millions of retail customers whom fintechs and robo advisers do not have.

Many banks might be missing the point, suggested Daniel Darst, the chief marketing officer of wealth and investment management for People’s United Bank in Bridgeport, Conn. Banks have the inherent advantage of a large, built-in customer base, Darst said, but over the past few decades these same customers have gone to advisory firms, or more recently fintechs, for investment and wealth services.

“The idea that the bank is your first choice for investment services has really been challenged aggressively over the past 30 years,” he said.
Neesha Hathi Schwab
Spread innovation to every corner of organization
Banks are spending millions of dollars on innovation, product development and new platforms to enter digital wealth management. But how can a bank make sure that good ideas and processes are spread throughout the organization?

Neesha Hathi, Schwab’s top digital executive (above), said the financial services firm is experimenting with rotating innovation teams throughout the company, so that they do not remain isolated in its digital labs.

Banks can also be thoughtful about how they implement new services and technology, said Michael Cordas, senior vice president of enterprise business transformation, process and workflow at City National Bank in Los Angeles. A release calendar, he suggested, might help customers and staff keep pace with new features.