Skip to main content
Open this photo in gallery:

The cloud underpins strategic transformation, making it a must-have among next-generation technologies. Research reveals that more than three-quarters of wealth management firms are in the mid to advanced stages of cloud implementation.NicoElNino/iStockPhoto / Getty Images

Canada’s wealth management firms have been pushed to up their pace of innovation like never before during the past year. For some, those efforts have had a silver lining.

According to the Next-Gen Technology Adoption Survey, a global study of 1,000 C-suite executives and their direct reports at financial services firms that Broadridge Financial Solutions Inc.* released in February, the wealth-management sector is among the least advanced in innovation within the financial services industry. Two-thirds of wealth management firms reported being in the early stages of innovation compared with other sectors such as banking or asset management, in which almost half are in later stages.

But for those wealth management firms that have upped their pace of innovation, the silver lining is apparent in their revenue, costs and profitability. Those that invested in next-generation technology are already reaping the rewards, to the tune of an average 2.73 per cent decrease in costs, 0.97 per cent increase in revenue and 1.25 per cent rise in profitability.

Worldwide, wealth management firms report, on average, that they plan to increase the share of their overall information technology budgets spent on next-generation technologies to 14.2 per from 9.9 per cent over the next two years – a startling increase of 43 per cent. Those wealth management firms defined by the study as leaders plan to increase their spending on such technologies to almost 22 per cent. Given the connection between these types of investments and margin growth, it may become increasingly difficult for laggards to generate the investments required to catch up.

But where to begin with these technologies? The cloud underpins strategic transformation, making it a must-have among next-generation technologies. The research revealed that wealth management firms have already taken their first steps toward embracing cloud technology. In fact, more than three-quarters of wealth management firms reported that they’re in the mid to advanced stages of cloud implementation. That makes sense for several reasons, which is why continued investment in this space is expected.

Data play a big role in how wealth management firms grow and are critical building blocks for creating new solutions and improving existing ones. But managing and analyzing data today requires previously unheard-of levels of computing power. Cloud services provide this power in a scalable manner. Firms that do not embrace moving to the cloud are increasingly handicapped in terms of delivering the insights that are possible through massive amounts of data.

The cloud can also help with the increased regulatory and compliance requirements, which are driving the need for improved security and resiliency, that firms face. Cloud-managed services can help firms achieve greater levels of efficiency through standardized processes and data while reducing operational risks. Cloud services also add increased oversight and business control, enabling wealth management firms to respond more effectively to regulatory reporting requirements and client service needs.

In Canada, artificial intelligence (AI) is also taking a front seat. That’s reflected in the Canadian Institute for Advanced Research’s Pan-Canadian AI Strategy, which will be investing $443.8-million in AI over the next 10 years, including $185-million in the next five, to support the commercialization of AI innovation and research.

The Canadian wealth management firms surveyed reported a specific interest in machine learning and natural language processing. While these technologies are likely to be less familiar to advisors than the cloud, there are already ways AI is disrupting and improving wealth management.

To start, AI’s growth will expand firms’ analytical and predictive power. New software solutions will help wealth management firms transform their business performance by harnessing vast amounts of data to predict each of their clients’ needs accurately, creating a more personalized and customized client and investor experience.

Advisors could even use AI virtual assistants to help reply to client questions. The assistant could perform an analysis of a client’s question and have some suggested alternatives ready for the advisor to review and discuss, guided by parameters the advisor sets.

The predictive analytics that AI enables can also allow advisors to understand each client’s specific needs, based on historical data, or even predict which clients are most likely to have one foot out the door. This is a truly hybrid approach in which technology lets advisors make better decisions across the board.

As such, technology is seen increasingly as a driver of success rather than a supportive pillar for wealth management firms. With the accelerated rate of change taking place right now, there are already signs of greater disparity between leaders and laggards; it’s unlikely for that trend to change course over the next five years.

It’s time for Canada’s wealth management firms to take a second look at how emerging technologies like cloud computing and AI can improve everything from advisor-client relationships to the bottom line.

*Donna Bristow is managing director, North American Wealth, at Broadridge Financial Solutions Inc. in Toronto.

Your Globe

Build your personal news feed

Follow topics related to this article:

Check Following for new articles

Interact with The Globe