Insights

Agility in the UK: How Wealth Managers Can Handle Market Volatility with Cloud

Since emerging from the Great Recession, wealth and asset management firms in the United Kingdom have operated in a mostly benign economic environment — characterized by decent economic growth and low inflation. But recent global events have upended business as usual and British firms will need new strategies and tools to thrive in our changing times.

A combination of factors is creating uncertainty around the stability of prices and interest rates: the aftereffects of Brexit, the British government’s “Levelling Up” plan, the impact of the Russo-Ukrainian War on energy security throughout Europe, climate and post-COVID resiliency initiatives, lingering supply chain concerns, etc.

This potentially means — in the minds of consumers — volatility, knocks to confidence, erosion of capital and ultimately fear. In turn, this means for wealth managers, a completely different set of demands on their organisational infrastructure. It will be like moving from swimming in warm water to swimming in an ice bath.

Rapid pace of technological change

In the context of a serious recessionary environment, wealth management clients may have significantly different demands than they had in recent memory. For the past ten to 15 years, a company’s relevance largely depended upon its ability to keep pace with technological change. Disruption across sectors has increased the overall ease and quality of digital experiences — raising expectations generally and compelling FS organizations to take digital business transformation seriously.

The Wealth and Asset Management 4.0 report, conducted by ThoughtLab and sponsored by Publicis Sapient, found that wealth firms are making significant progress in digital transformation. Nearly three-quarters of firms are ahead in transforming the customer experience, saying they are mid-implementation or at the advanced stages of digital development. Over half have reached the same threshold for automated processes, artificial intelligence, blockchain and cloud.

Wealth management firms in the United Kingdom are accustomed to a stable economic environment in which keeping up with the rapid technological acceleration was the biggest challenge. A firm’s willingness to invest in organizational change and ability to meet and exceed customer expectations with exceptional digital experiences has distinguished winners from the pack. But times have changed.

Geopolitics and economic uncertainty

UK inflation was already at a 30-year high before Russia invaded Ukraine, which led to further price increases for energy, food and other commodities. In March 2022, the Bank of England voted to raise interest rates for the third consecutive time.

A new type of change — creeping uncertainty — will be layered on top of the ever-present, rapid technological acceleration… and pose a series of serious issues for many organizations — not least of all those in wealth management.

He argues that in an unstable economic environment, fear will become a more significant factor in determining where potential clients take their savings. Firms will need the appropriate technologies and related processes to provide serious advice to worried clients and handle consequential decisions.

With so much happening in the world, the public also increasingly expects financial institutions to articulate a sense of purpose beyond benefiting shareholders.

Wealth and Asset Management 4.0 found that European firms are generally the most driven by ESG (environmental, social and governance) concerns, especially with the European Union’s adoption of new regulations. In the United Kingdom and Ireland, 56% of surveyed investment providers said their clients expect them to have ESG knowledge.

To be clear, creating pleasant digital experiences will still be essential. But the ability to scale services and cope with increased demand while providing robust security will only grow in importance — as will having the flexibility to invest for a better future.

The promise of cloud enabled technology

A key to unlocking all of this is cloud, a central component of Industry 4.0: the emerging era of the Industrial Revolution, characterized by automation, interconnectivity and real-time data. Too often thought of as merely a storage method, cloud computing is truly a new paradigm that enriches and accelerates other technologies, which enables new capabilities and processes.

Migrating more IT services to the cloud doesn’t just mean off-premises storage. It means building sleeker, faster platforms and services directly in the cloud, with modern engineering methods and iterative improvements. It means having modular platforms, with distinct blocks that can be altered or removed without disrupting the whole.

For wealth management firms in the United Kingdom, cloud creates the opportunity to establish a strong, flexible technology foundation that can be scaled quickly and easily to deal with fluctuations in demand. So, in times of economic uncertainty and evolving regulations, companies can have the agility to change directions without losing work or momentum.

Rich data in Great Britain

Throughout the world, people tend to appreciate digital advancement without fully understanding how it transpires. This trend holds true for the UK as well.

Publicis Sapient’s Data Collection and Consent Survey, powered by IPSOS and sponsored by Google Cloud, found that 64% of Britons have a positive view of technology’s impact on their personal lives, but that 77% know little to nothing about what companies do with the data collected from them.

When asked about financial services companies in particular, Britons were more likely than Australian, American, French and German respondents to share their personal information (74%) and contact information (76%). However, the British were far less likely than the Americans to share their location, issued or biometric information with financial services companies.

Types of data people are willing to share with FS companies online

The overall survey results suggest that if businesses are more open about how and why they collect data on the public, people would be more likely to share that data with them. The truth is that Great Britain’s wealth management industry has made significant progress in digital business transformation, but there’s more to do. By migrating to the cloud and embracing agile working methods, wealth management firms will be better placed to deal with whatever comes their way in these challenging ad uncertain times.