Over the past two months, COVID-19 has not only created a global health crisis but also led to socio economic disruption and affected major industry sectors, including healthcare, banking, insurance, capital markets and so on.
Wealth management is one of the vulnerable sectors with highly correlated revenues to capital market performance and has already started experiencing loss in revenue and growth. The stock market response to the COVID-19 pandemic has been panic driven and volatile and could continue to be so until the spread of the virus is contained. With the economic data likely to worsen in the coming months, stock markets could experience another round of correction.
As a result, firms have initially struggled and are now implementing plans to reduce costs, assess spending, with continued efforts to tackle extremely high trade volumes and keep critical processes running. Most firms have now dealt with the initial priorities to ensure large scale business continuity and set up the majority of the workforce to work remotely. These firms are now working to identify data and information security risks and reprioritize organization strategies and projects.
There are a few firms that are yielding benefits of prior investments in digital transformation, automation and infosec who are slightly ahead in the digital maturity curve while others are just starting out to plan and strategize their digital journey for the near future.
From our experience, we believe there are four key themes shaping up during this crisis which will help wealth management firms stay resilient:
- Focus on cost reduction and rationalization: To tackle market volatility, there is an increased focus on optimizing costs and improving operational efficiency. With a growing volume of business transactions, deployment of tactical automation solutions to automate trade processing and compliance reporting will embed the much needed flexibility and improve productivity. Outsourcing additional processes for short to medium term will also help address the increase in workload without huge cost investments. On the technology front, leveraging cloud solutions would be a quick win to reduce fixed costs immediately.
- Prioritize risk and data security: Given millions of resources are working remotely, companies will have to revisit cybersecurity best practices and enhance/upgrade systems to protect from unauthorized access, phishing scams, etc. With unsecured channels and networks for remote employees, wealth management firms will also need to reassess access to applications depending on criticality due to the increasing threat of cybersecurity. Adoption of multi-factor authentication and enhancing security incident management protocols would be vital in maintaining data security.
- Continue to focus on Digital Transformation: Firms need to double down at their digital transformation practice to defend their core business and emerge as a winner in this new normal. Digital analytics is critical for companies to refine their portfolio strategy, help automate critical processes through usage patterns, strengthen market research and insights to better communicate with advisors, broker dealers and investors. The significance of omnichannel and well-designed advisor & investor portals could have never been higher. Simple and intuitive portals will help communicate account/portfolio performance and help stakeholders make data, transaction requests faster and understand how they are being impacted in real time. It’s critical to harness the data across the web, mobile, branches, CRM to make sure the best of the experience can be provided to clients and advisors.
- Enhance IT resiliency: Most firms were unprepared for a crisis of this magnitude, given its unprecedented nature. While on the one hand, businesses have managed to get their workforces set up remotely, it is critical that they continue to assess the impact of network traffic, volumes, on the infrastructure. They should also prepare and update plans to address security breaches, network breakdowns, and critical resource unavailability in a proactive manner.
In spite of the downfalls, every crisis helps businesses realize their underlying strengths and helps them define their strategy roadmap for the next journey. We strongly believe that investments in operational efficiencies, digital transformation and customer experience optimization while continuing to work on data security and BCP will be the key pillars of running a resilient business during this crisis. They will continue to remain important in the ‘new normal’ that will emerge post the pandemic as well.