As the global economy faces more turmoil than its seen in decades, wealth management professionals need to consider what an economic downturn means for business.
Every business industry is evolving to be more digitally oriented — with the wealth management industry quickly following suit. The key for wealth management businesses to overcome the challenges associated with an economic downturn is to embrace innovative technologies and digital transformation.
In this article, we explore what to expect from current economic circumstances. Plus, we discuss why wealth management providers need to prepare and how they can strive to boost revenues despite economic challenges.
What to Expect from the Economic Downturn
In a June 2022 report from The World Bank, it is reported that global growth fell from 5.7 percent in 2021 to an estimated 2.9 percent in 2022. Moreover, The World Bank remarks on the growing disruption from the Russian war in Ukraine and how it will likely cause global growth to stay at this low percentage rate through 2023 and 2024.
However, though it is wise for wealth management providers to brace for the incoming impact of this economic turmoil, it is important to also consider how businesses can adapt to changing circumstances to survive and even thrive during a time of economic uncertainty.
According to a 2022 Morgan Stanley report, the ongoing economic downturn is more closely related to excess liquidity rather than debt. This can be an advantage for wealth management companies, as inflation-driven downturns tend to have a less severe impact on corporate earnings and thereby investor assets.
Keeping this differentiation of an inflation-driven downturn in mind, let’s now discuss the importance of preparing for an economic downturn from a wealth management perspective.
Why Wealth Management Providers Need to Prepare for an Economic Downturn
When the world falls into a period of reduced growth, wealth management providers need to have a clear prioritization of their clients’ needs. Clients will want greater transparency, efficiency, and affordability when it comes to what wealth management services they will favor.
Moreover, during a downturn, wealth management clients are likely to reexamine their assets to ensure their stock portfolios, retirement plans, real estate, and more are good and safe investments.
For wealth management providers, this means a much greater emphasis must be placed on:
- Personalized Customer Service: Clients looking for wealth management services during an economic downturn are searching for a company that can help them manage and plan their finances according to their specific life circumstances. Having the resources available to provide a personalized experience to each client is, thus, essential during an economic downturn. This can come in the form of more support staff or AI-enhanced customer service centers.
- Streamlined Financial Management: When facing economic uncertainty, wealth management clients are prone to turn toward companies that enable them to gain a holistic view of their financial health and planning. To satisfy this need during a downturn, it is crucial to have a unified platform where clients can handle all of their wealth management needs, from investment and estate planning to saving for retirement and taxes.
- Competitive Products: It is of the utmost importance for wealth management providers to ensure the products they offer are up to par with their competitors. The speed of technological development and innovation in the wealth management industry is not slowing down, making it a necessity to invest in for any provider that plans to come out of the other end of this economic downturn stronger.
How Wealth Management Providers Can Boost Revenues During an Economic Downturn
As we discussed above, the three main priorities for wealth management providers to focus on during an economic downturn are personalized customer service, streamlined financial management, and competitive products. Yet, achieving these three goals is easier said than done.
To not only remain competitive but also boost revenues regardless of the economic circumstances of the moment, it is essential to leverage digital transformation technologies.
With the right set of technological resources and talented FinTech experts, a wealth management business can increase revenues by providing clients with the exact services and products they desire. Digital transformation includes key changes to a business’s digital infrastructure, including:
- Cloud Migrations: To get the most out of a digital platform, wealth management businesses should consider migrating their digital infrastructure to the cloud. Not only will this make your services more accessible to clients but it can also enable you to set up a remote or hybrid work environment, allowing you to cut operational costs associated with a traditional office setting.
- DevOps Implementations: Now more than ever, it is essential to have clear lines of communication between all departments in a business. With the DevOps approach to digital transformation, wealth management providers can enable seamless communication between development and operation teams.
- AI Support: The ability to provide well-rounded support to clients is a must during times of economic hardship. For a wealth management provider to ensure all clients are receiving tailored service with personalized recommendations based on their preferences and investment habits, having powerful AI support to help operate a support call center or online help desk.
Ever considered Robotic Process Automation (RPA) Integration for your business?
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Offering a streamlined approach that allows clients to access all of their financial and investment information in a central channel is a huge game changer and can greatly enhance your competitive edge.
Final Thoughts
An economic downturn does not have to mean failure when it comes to running a successful wealth management business. Instead, it will require wealth management professionals to think outside the box, embrace technology, and focus on the needs of their valued clients.
We’re here to help your wealth management firm drive revenue and increase share of wallet. Our team consists of talented FinTech professionals who are highly experienced in the wealth management industry and understand the complexities of the problems you face.
To get started, contact our team today.
