• October
  • 2021

Digital Wealth Propositions: Achieving Strategic Flexibility

Technological progress tends to manifest itself in distinct industry-wide trends within the financial sector but each resulting transformation story is unique. Whether you represent a large institution with a few infrastructural challenges or a leading neo bank on its journey of building a customer base, there is no ‘one-size-fits-all' approach when it comes to updating your digital services. The action plan would depend on the exact size of the business, available tech stack, human resources and many more factors defining your institution. The effects of COVID-19 only confirm that we live in a world of rapid change, and therefore any strategy needs to be reviewed, updated or changed very frequently.

Once your team decides on building a new digital service or feature, it is always a good idea to avoid chasing short-term gains and think strategically. It is likely that after a successful pilot, you would like to tailor the functionality to suit customers' feedback. Furthermore, after a while, you might wish to expand your business to a different country and ensure that its digital core is compatible with local regulations, tax regimes and account structures on an ongoing basis. Finally, as you navigate your roadmap, you might want to complement your services with new use cases and expand your customer base. All these strategies require tremendous flexibility of the technology driving your digital and hybrid financial journeys. Today we examine the key technological factors ensuring the flexibility of digital financial services.

Some important elements of strategic flexibility of a digital proposition are related to core components such as the calculation engine driving its predictions and estimates. A multi-period, simulation-based underlying model can help you represent your institution's financial products, fees and strategies as accurately as possible. In the case of Kidbrooke's OutRank, this is achieved by capturing the probabilistic aspects of the market development, allowing for granular mapping of your institutions' products as well as the incorporation of house views. Features such as these are paramount for efficient updating of product lines and investment strategies. They also support the easy addition of new tax regimes and account types in the event of expansion to new markets. Finally, the flexibility that comes from a simulation-based, multi-period model allows for the creation of personalised solutions targeted to all sorts of customers, from retail investors to HNWIs.

The ability to equip retail wealth management customers with a 360-degree view of their financials is one of the most significant industry trends of 2021. However, in our experience, customers tend to start their digitalisation journeys by focusing on one business area and gradually adding more use cases as they navigate through their transformation strategy. Hence, flexibility is a real strategic advantage when it comes to ensuring that the technology driving your digital services can support you throughout the entire roadmap and beyond. This is an important reason we built a multi-period Monte Carlo model offering the ability to analyse complex real-world situations. This characteristic allows for considering any part, or the whole financial position, of an end-customer, enabling our customers to model virtually any use case that could be expressed through stochastic modelling of cash flows.

Another critical aspect of strategic flexibility concerns the consistency of the numerical output driving your digital customer journeys. Many financial institutions experience systems powering different customer journeys not working well together. They frequently partly overlap in terms of superficial functionality but contain conflicting underlying assumptions. This issue may lead to discrepancies in the customer experience and have a detrimental effect on the speed of digital transformation projects. Making sure that your calculation engine supports the holistic use case consistently while allowing you to pick and choose specific use cases where relevant is a vital step to achieving consistency within your services.

It is fair to claim that the accelerated digitalisation, partly driven by the pandemic, inspired financial institutions to change their mindset towards going digital. However, in this environment of rapid change and uncertainty, it might be tempting to make short-term decisions, which may harm your organisation's ability to adapt to changes quickly and efficiently in the future. In our experience, we found it essential to maintain a strategic perspective regarding technology driving your solution. It pays off to devote attention to the models performing the core calculations within your digital services. Moreover, it is a good idea to ensure that even if you choose to start small, your technology will allow you to complete the following steps of your strategic roadmap. Finally, it is crucial to achieve consistency of any financial guidance or advice in your digital financial services, both for improving the customer experience and decreasing time-to-market for your future digital journeys.

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