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What’s your wealth management digital strategy? If you’d have to think about it to know the answer or call your CTO, you aren’t alone. The wealth management industry’s digital maturity is far behind most other industries – and it’s even behind other financial services sectors.

In fact, PWC calls wealth management “one of the least tech-literate" sectors of financial services.

That’s harsh. And to be fair, most leaders understand the need for wealth management digital transformation. They simply aren’t moving quickly enough.

They should. Wealth and Asset Management 2022 – The Path to Digital Leadership, a report from Oracle, frames it starkly:

“With the industry facing high-velocity change, investment providers must act now to embrace digital innovation. Firms that have already reached an advanced digital stage report an 8.6% increase in revenue, an 11.3% rise in productivity, and a 6.3% improvement in market share. Those that move too slowly stand to lose $79 million per billion dollars of revenue a year – and risk falling out of the race altogether.”

So, what’s standing in the way? We’ve identified several barriers; we’ll focus on six.

1. Lack of Client Demand

This may be less of a barrier than an excuse, but it’s nevertheless hindering digital transformation. Client uptake is slow – at least among older high-net-worth-individual (HNWI) clients – the generation moving toward retirement: Most aren’t pushing for digital, and many may even be resistant. But it’s just a matter of time until wealth passes to the next generations – those raised on digital.

Business Insider does a nice job of articulating the challenge:

“As innovations emerge that enable more efficient wealth management, some wealth managers are torn between catering to an existing loyal client base’s needs, and adequately preparing themselves to meet those of potential future customers, due to a gap in generational preferences.” This can “hamper their firm’s ability to build out a fully digitized service and take full advantage of new technologies.”

McKinsey, too, finds that client uptake is low. However, the wealth management firms that embrace digital – “digital attackers”– are already benefiting. “Clients of digital attackers report high levels of satisfaction – 5 to 10 times higher than clients of traditional wealth managers – due in large part to their improved experiences.”

The clients may even be more digitally savvy than their wealth management firm. According to PwC, 69% of HNWIs were using online/mobile banking but only a quarter of wealth managers offered digital channels beyond email.

Digital wealth management may not be a “thing” today. But it most certainly will be tomorrow. Wealth management firms need to embrace digital innovation.

But can they innovate?

2. Unwillingness to Innovate

This should come as no surprise: Risk-averse cultures – and that certainly describes wealth management – don’t experiment or innovate quickly. To some, “wealth management innovation” may sound like an oxymoron.

Building a culture of innovation that fosters experimentation can be challenging because it has to allow for potential failure. “Fail fast, fail often” isn’t exactly a mantra in any financial services business, least of all wealth management.

To make innovation a reality and not just a catchword, wealth management firms need to conduct ongoing digital business training; it’s required at all levels, according to an EY report, Digital Disruption in Wealth Management. And of course, it must start at the top.

3. Lack of Vision

Creating a culture of innovation that makes digital transformation possible requires a vision. And that vision can’t just come from IT – it must come from the top. Leaders need to articulate a vision, create a roadmap, set expectations, and encourage collaboration, and innovation, according to the Oracle report.

This vision needs to incorporate all aspects of the firm because digital isn’t just another tool in the toolbox. In some respects, it is the toolbox – one the entire firm uses.

4. Inadequate Collaboration Between IT and Lines of Business

This challenge is one that plagues almost every industry. Digital transformation projects often stall due to a lack of collaboration between business and IT departments.

It’s even worse in wealth management. “Wealth managers still tend to sideline technology as a factor that merely supports and enables their core business, rather than recognizing it as a central strategic element in its own right,” warns the EY report.

It’s essential to asses the broader implications across the business and operating model – and then get everyone on board.

This frames digital as a business strategy, not an IT one. “Rather than just an add-on, digital has the potential to completely transform every stage of the wealth management journey, from how existing clients are advised and serviced to how prospective clients are identified and marketed to,” the PWC report explains.

Wealth management digital transformation can’t only be about changing processes and technology. “Our recent technology rebuild wasn’t a cultural shift, it was a cultural earthquake,” Michael Williamson, executive director, State of Wisconsin Investment Board, said in the Oracle report.

5. Lack of Interoperability Between Legacy Systems

Now we get to what may be the most difficult barrier to overcome: The technology itself. CapGemini, in its World FinTech report, points out that legacy-system issues compound other challenges financial services industries face, that “most infrastructure investments were stop-gap solutions not designed for compatibility with the latest technologies.”

Rigid legacy systems lack scalability, can’t process in real time and don’t “talk” to each other. Without interoperability, there can be no digital transformation.

“Abandoning legacy systems can be costly, but firms must modernize their core to support compatibility with the latest technologies and third-party systems,” according to CapGemini. (And yes, they may have a vested interest in saying this, but we still think it’s spot on.)

Migrating to a cloud-based digital system can address the data-management needs while improving security. It’s a twofer, according to

“In addition, from a cost perspective, one cloud solution that handles both cybersecurity and data management is cheaper than two different applications from one or multiple vendors. But more importantly, the consolidation of data and systems also helps advisors realize cost savings and greater efficiency by significantly streamlining workflows related to data management, transaction processing, and other operations across their businesses while remaining secure and compliant.”

And this gets to the next challenge.

6. Data Housed in Disparate Systems

As we all know – and as pointed out – it’s easier to protect multiple systems for processing and storing data when they are consolidated on a single platform. But legacy systems and processes make such innovation difficult. Still, wealth management firms will need to take the leap eventually. You need to make business intelligence accessible by uniting all of a company’s data in a single place for analysis.

One approach: Investing in data warehousing technology. You can read about our experience helping a financial services client make that transition here. A data warehouse isn’t for everyone. We developed a comparison chart that breaks down the differences between data warehouses and traditional databases; it will help you decide which is best for you.

Change is Coming

Digital wealth management is still in an embryonic state – even compared to consumer banking. “However, the same forces that drove these innovations – 24/7 digital delivery, compliance, contextual relevance, and transparency on fees – are now also driving changes in digital wealth management,” according to a Thomson Reuters report.

It’s important to note that it’s not a tradeoff between high-touch and high-tech. Digital transformation can amplify the “touch.”

From Gartner:

“Gartner believes that the future of wealth management will combine the traditional advisor-led coaching and financial planning with digital tools to meet the increasingly complex client requirements and do so in a more cost-effective manner.” As wealth management firms and their clients use these tools “the amount of information collected on clients and their preferences will significantly improve the personalization and contextualization of the wealth management firms, financial coaching, and related investment strategies.”

Or perhaps just listen to how Bob Reynolds, president and CEO, Putnam Investments and Great-West Financial, put it in the Oracle report: “Technology is the future of our industry.”