We are in the midst of a 'total reboot' of wealth management

BMO InvestorLine president writes that, with the industry in the process of massive disruption, now is not the time for firms to be reticent or timid

We are in the midst of a 'total reboot' of wealth management

BMO InvestorLine’s president Silvio Stroescu says the surge in adoption of digital investing during the COVID-19 crisis is simply incredible and that we are in the middle of a disruption process that will reshape the future of wealth management for years to come.

Over the past eight weeks we’ve been navigating an exogenous global shock with a range of vibrations that we’ve never experienced before.

On a business level, massive disruption is inevitable and relentless. It’s also always ON.  Like gravity, disruption and innovation pull everything forward – constantly.  The effect of this pull is towards better and rarely in a straight line. Sometimes we lead the innovation and other times we flow with it.  It’s like riding the waves.

As leaders and as business owners, we actually signed up for this.  Inevitably, we’re all leaders of change and bound to be tested on our ability to adapt. We all committed to navigating through the journey of disruption, knowing we will face vibrations beyond our control.  We considered multiple “what if” scenarios, prepared contingencies and were ready to be tested.

Reflecting on the past couple of months, it’s evident that we’ve experienced disruption with a whole new level of vibration and we rapidly adapted.  We learned more about the pace and tsunami of change that a nation, a regulated industry or an organization can create when mobilized to achieve a common goal.

We learned how we transform while we perform and still deliver the jobs for which our clients hired us.  We learned how well we actually do what we said we would do.  We learned how purpose, culture and mission translate from what’s “written on an organization’s wall” to “real life” at light speed.

On the digital investing front, we experienced record levels of demand from investors.  While they are slowly becoming buzzwords, we redefined “unprecedented” and created “new norms”.  The surge in adoption of digital investing is simply incredible.

New account openings trended three times higher than seasonal peaks typically experienced in January and February.  Daily trading volumes set new all-time records, at levels that were two and a half times higher than seasonal trends. Transfers of funds peaked at levels that were ten times higher than previous norms, with transfers into digital investing accounts making up the bulk of the volume.

Generational divides became apparent as investors reacted to market turbulence.  Millennials added more cash to their accounts and bought into the market more aggressively than older peers. With lower tolerance for risk, the majority of Gen Xers and younger baby boomers readjusted their portfolio holdings.  Only older baby boomers sold slightly more assets than they bought, in order to build up liquidity buffers.

We transformed how we work, with physical distancing a priority in our office locations.  We enabled remote access capabilities for our talented teams, including the ability for our contact centre agents and digital investing advisors to respond to inbound calls from home.

The combination of record demand, all while establishing physical distancing and activating remote access, led to wait times that were much longer than what our clients have come to expect from us.  While we can’t be proud of this, we are extremely grateful for their patience and understanding. We have taken deliberate actions to optimize the experience and drastically reduce the wait times, both in the short and mid term.

The capacity of our trading platform was also tested. Our deliberate investments to increase the capacity of concurrent users on our platform led to utilization rates which peaked at 70% of our total capacity, on days when new records of daily trading volumes were set. This is the opposite of Ground Hog Day.  Every day brings new challenges and opportunities. We’re adapting to higher vibrations and quickly adopting new moves in our dance with disruption.

I believe we are in the midst of a major disruption for wealth management. This is not a break in the system, it’s a total reboot of the system.  More importantly, it’s not a one-time event that has shattered the status quo.  We're in the midst of a disruption process which will reshape the future of wealth management for years to come.

The digitization of wealth management in most firms will continue, with an unprecedented – and still buzzing – sense of urgency. Yes, digitization will make the current experience and services better for investors.  Yet, in the long run the outcomes of digitization will feel like incremental improvements.

Heightened levels of adversity and uncertainty are elevating the value of advice across a broader spectrum.  In the new context, investors will be seeking and willing to consume more financial advice in their digital travels, with a vested interest and more scrutiny on value created.

This will require broader expertise on both rational and emotional elements of wealth management to be delivered with personalization on demand and at scale.  Yes, this will feel like we’re living on a different planet compared to the old context where – proverbially – investment products were “sold, not bought”.

For advisors and wealth management firms, now is not the time to be reticent or timid.  It’s the time to decipher the signals from the noise and deliberately create new hybrid digital advice models.  Fortune favours the bold, with the fortitude to embark on transformation journeys with intent and purpose.  The key question is this: How are you future proofing your business?