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August 18, 2017 at 05:28 AM
Banks today perform a double duty. On the one hand, they’re steadfast providers of investment advisory services for the local community. On the other, they must constantly innovate, looking forward to keep ahead of regulation and competition.
Traditional but innovative – they don’t seem to mix. We’re no strangers to witnessing financial giants felled by disruptive innovation and regulatory scrutiny. But despite seeing how denial has affected other institutions, as many as one-third of bank wealth management leaders would prefer to ignore the competitive and regulatory threats and carry on business as usual.
That surprising statistic was revealed in a survey conducted earlier this year by Longitude Research on behalf of Grant Thornton. Of those surveyed, the majority of corporate and investment banks, wealth management and retail banks agree that all banks will eventually use digital platforms. But that still means 39 percent of retail banking executives refuse to believe that digital platforms are necessary to survive in the current environment.
Similarly substantive minorities within the banking industry seem to resist other “modern realities” of 21st century banking. For instance, the survey revealed that one-quarter of senior wealth managers and one-third of top retail bankers say they disagree that traditional banks will face increasingly more competition from outside their industry. This is despite the proliferation of fintech startups directly targeting banking customers with typically smarter and slicker technology platforms.
Survival for banking’s old guard will depend on these institutions’ abilities to adapt to the new world order. Envestnet has highlighted five factors critical for delivering meaningful change:
1. Vision. The approach to change must be set at the top of the organization, where leadership must effectively impart their business vision throughout the organization.
2. Client experience and segmentation. Once that vision is ingrained in the culture, firms need to align service and support practices among different client segments to design predictable client experiences. Digital engagement clearly helps with this.
3. Creating capacity via technology integration. The alignment of vision and experience is meaningless unless firms create excess capacity by integrating and simplifying elements of the advisory value chain. In short, firms need to turbo-charge integration through more focused and efficient use of technology.
4. Creating a consultative approach. Firms should leverage that excess capacity to create a high-performing consultative sales culture to improve profitably across segments.
5. Managing regulation and risk effectively. Finally, change will be hobbled unless firms have the ability to be proactive around the management of fiduciary and regulatory responsibilities and associated risks.
THE LEGACY HURDLE
