Although the wealth-management industry is undergoing disruption on several fronts, no two factors are affecting dealers and their advisors more than emerging technology and the changing regulatory landscape. The dealers that succeed in this new landscape will be the ones that can embrace this change while engaging their advisors in the process.

The disruption that ensued from the financial crisis 10 years ago will ultimately transform the way financial services institutions do business, according to PricewatehouseCoopers LLP’s (PwC) Global FinTech Report 2017. Today, financial services institutions are struggling to determine how best to leverage technology in their business models; how to use it as an enabler and not necessarily a disruptor; and whether to partner or compete with new financial technology entrants. Tomorrow, advisors will coach clients to take appropriate financial decisions based on a combination of artificial intelligence (AI), transaction and contextual data. Friction, frustration and cost will decrease as new business models and emerging technologies are adopted to streamline marketing activities, onboarding processes, compliance, operations and client communication.

Yet, wealth managers typically overestimate their digital offering by assuming their digitally based services are meeting clients’ demands. Client expectations are at odds with what’s currently being provided. When high net-worth individuals (HNWIs) are asked to assess what they value most about their chosen wealth-management firm, technical capabilities and digital offering rank just eighth out of eleven options. Current levels of digital adoption are notoriously low across the wealth-management industry, typical in many respects of an industry that has been focused on human relationships, in which there has been little incentive to change existing business models.

Discouragingly, low levels of client advocacy also mean that firms cannot rely on other strengths, such as the quality of their human relationships or their brands, to make up for shortfalls in their technological offerings. According to PwC’s research, only one-third of wealth-management clients, globally, claim to be very satisfied with their chosen firm’s service and just 39% of clients are likely to recommend their wealth manager to others.

Another PwC report, entitled Sink or Swim: Why Wealth Management Can’t Afford to Miss the Digital Wave, PwC suggests that wealth-management firms are uniquely positioned to harness digital growth potential. Advisors enjoy high levels of trust among their client base and given their unique role, already receive a wealth of data spanning both financial and non-financial aspects of their clients’ lives. As other non-financial digital platforms such as Uber, Amazon and Shopify have shown us, people are willing to divulge personal data if it improves their overall user experience. This, too, is the case in wealth-management. In addition, advisors provide a service in which all clients are truly interested and engaged: the optimization of their own wealth. So, advisors hold great potential in helping their firms to navigate change.

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The influence of regulation on technology, or regtech, has emerged to characterize innovation that focuses on solving complex regulatory challenges. Regulation involving point-of-sale disclosure, the second phase of the client relationship model (CRM2) and the potential introduction of a best interests standard are concerns driving regtech in the wealth-management industry. There are many aspects to this including automation, data and analytics, machine learning, AI and potentially blockchain, to name a few.

Historically, regulation was seen as a barrier to entry into financial services. The requirements were complex and difficult for new entrants to adopt, but this has now reversed. Many dealers and asset managers are hampered by complex processes and governance they have built up over the years around risk and regulation, and many have also developed a significant risk aversion, given some of the public debacles of the past. New entrants unencumbered by legacy systems and processes are leveraging regtech offerings to overcome these barriers. Thus, it’s not surprising to find innovation influencing this area.

Regulators are also looking at ways to leverage new technology and analytics to better manage systemic risk and large amounts of data. Use of blockchain is also a specific area of interest for regulators given the native “regulatory capabilities” that are embedded in the technology. Transactions can be validated on the fly rather than monitored by intermediaries after the fact.

As with other industries, technology and regulation have been disruptive to the status quo. However, they have also provided clients with more insight and better overall service experiences. Although regulators have mandated progress, it has also been made possible by technology. The wealth-management industry is beyond the cusp of change; change has already happened. Advisors who can help their dealers leverage technology while navigating the regulatory landscape will be successful.