The wealth management industry risks losing the upcoming generation of clients by lacking an integrated multi-channel approach to interacting with clients, says one industry expert.

Michael Diefenthäler, director of product management at Interactive Data Managed Solutions, explains why wealth managers require new client management strategies in the age of social media.

When it comes to interacting with clients, the wealth management industry may be behind the technology curve and risk losing the upcoming generation of clients by lacking an integrated multi-channel approach - that is the verdict of Michael Diefenthäler of Interactive Data.

Scarcely a week goes by without another consultancy bewailing the wealth management industry’s under-investment in new communication methods like mobile apps or social media. In response firms have been noticeably ramping up their efforts to keep pace with sectors like FMCG in their provision, with even the most formerly recalcitrant and “old school” of institutions making their first forays into new communication channels.

And about time, most would say. Unfortunately, it might be the case that the world’s wealth managers are actually looking at things from the wrong perspective, according to Diefenthäle.

“Pulling” client engagement

The adoption of mobile internet use and social networking sites, combined with the changing behavioral trends of the upcoming generation of consumers have transformed the way people interact globally. This, in turn, has had a huge impact on the evolution of the industry’s ability to communicate effectively with its clients.

However, Diefenthäler explains that what we currently have are firms launching Facebook pages and Twitter accounts and trying to usher clients into using them. He argues that what they should be doing instead is integrating themselves into the channels clients are already using. In short, firms should be following their clients behavioral trends with a view to  “pull rather than push” clients to engage.

By this Diefenthäler means that firms should be providing interactivity via all the channels clients are using “in situ.” Put simply, rather than trying to funnel clients to a generic Facebook page that re-directs to the traditional web-portal to perform an action, wealth managers should look instead to embed themselves within the channels their clients are using on a daily basis. This encompasses social networking sites, as well as mobile and tablet applications, and  personal homepages.

In discussing frontrunners in the race for moving into these new channels Diefenthäler gives two examples from the retail space which should give wealth management firms real food for thought. The first is India’s ICICI Bank which recently launched a transactional banking app within Facebook. Even more interesting is the case of the US firm Loyal3, which has put an app into Facebook enabling clients to trade equities – without ever leaving their own Facebook page.

So while some firms have recognized the importance of serving the customer effectively and efficiently across all channels, the industry still faces several technological and strategic issues. Many firms have difficulties establishing a standardized data management approach, which is a prerequisite to managing a multi-channel presence, due to their reliance on legacy systems.

Multi-channel strategies generally only create real added value when consistent data and services are available for the different applications and channels and there are no system breaks. As a result managers should be looking to widen their connectivity and synchronize the same data to multiple sources simultaneously, says Diefenthäler. A helpful analogy here, he says, is where a person takes a photo on their iPhone and this is automatically then stored and available on their various computers via the Apple iCloud.

Mobile is the future

This is even more important in the context of prevailing usage trends. Accenture estimates that last year 14 million people accessed the internet via their mobile device – almost five times more than in 2008 (3 million). Moreover, the IT research firm Gartner predicts that by 2013, smartphones will overtake computers as the main access route to the internet.

Another trend is the increasing popularity of portals like iGoogle where multiple data sources are “parked” on the individual’s personal homepage so that they can customize  their news and social media feeds, emails and other tools all in single page view. In light of these two trends, Diefenthäler advises firms to focus on increasing the number of “touchpoints” with clients and prospects. “It’s not about boosting the traditional portal approach,” he says, “it’s about placing your services where your clients are spending their time online.”

Diefenthäler is actually touching on two key themes here when it comes to new communication channels, the first being that client-centric service is about communicating with users via their preferred channels. Leading on from this is a very salient second point, that the social media landscape is still evolving itself. Firms may be pouring money into Facebook and Twitter provision, but who is to say which channels will dominate in years to come? The advantage of the “embedded” rather than proprietary approach is that the inevitable evolution of technology poses far fewer problems, according to Diefenthäler.

Channel diversification

“It’s not enough to identify one single channel if you’re really thinking about multi-channel strategies… today it’s all about Facebook, tomorrow it might be Google+. That is where a single, flexible platform containing client data comes to the fore as it is the basis for feeding into the various channels. That could be a mobile app or a social network that exists today, or in five years time,” he says.

It’s easy to see here why diversification applies as much to communication channels as it does to assets when it comes to avoiding costly mistakes like over-investing in a channel which soon goes out of fashion. The world of social media is of course a fickle one, by virtue of its own immediacy.

While it remains to be seen what will be top of the social media heap in years to come, one thing is for sure in Diefenthäler’s view: “social media sites are here to stay.” Various factors, like compliance concerns and the time required to integrate legacy technology may have stymied investment to date, but this has to change going forwards, he says. In his view, at root the issue is about entering these new channels to service existing clients and, crucially, in order to win new business. “It’s about wealth managers widening the potential client base for their services.”

Interactive Data recently published a whitepaper on this topic, entitled Follow Your Customer Through Mobile And Social Media Solutions. The firm believes that firms should be taking a multi-channel communication approach which comprises four main elements: mobile devices; social networking sites; financial websites and personal homepages. A copy can be downloaded here.

In the course of the coming weeks Diefenthäler will be giving further guidance on how the most forward-thinking firms should be approaching their multi-channel strategies.