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Our engagement with clients involves physical & digital touchpoints: Karan Bhagat of IIFL Wealth & Asset Management

One might easily claim that the pandemic years gave every company and sector an opportunity to change and develop plans to become a unit that can withstand future shocks. Every industry has seen significant changes as a result of digitisation and different tactics. In just two years, a number of industries have seen significant upheaval, and some businesses are still adjusting to the impact that the development of financial technologies is having on how individuals manage their finances.

Karan Bhagat, Founder, MD & CEO, IIFL Wealth & Asset Management takes us through the dynamics in the asset management world. He shares his thoughts on dynamic change in consumer behaviour, adapting to a larger audience with digital initiatives, and the evolution of a more holistic and strategic role of the wealth manager.

What are the key trends in consumer behaviour that have helped you as a wealth manager?

The term ‘wealth manager’ encompasses a multitude of activities. Clients have myriad needs related to personal finance, investments, estate planning and credit. When it comes to optimally servicing wealthy clients, there is a lot of handholding needed. We also need to holistically understand clients to offer nuanced solutions and services that can meet their specific requirements. From a consumer behaviour perspective, most clients are naturally risk- averse and assign equal importance to wealth protection as they do to wealth creation. Further, while it is important for investor portfolios to be agile and respond to changing landscape and opportunities, clients tend to be less agile. Our engagement with clients involves a healthy mix of both, physical as well as digital touchpoints. Digital solutions are being deployed to make processes and service delivery more efficient, transparent, and seamless. Technology is also being leveraged to give a fillip to product-side innovation and create innovative products with compelling risk-return metrics. Knowing and understanding these nuances can help in ensuring that optimal solutions are offered to customers.

Financial advisory firms had already begun a digital transformation, the pandemic merely proved to be a catalyst. How has your firm catered to a larger audience with digital initiatives?

Today, digitisation has become an ongoing and core element for organisations that are looking to not just survive, but also thrive in the new normal. Thus, it has become essential for forward-looking wealth management firms to think like technology firms. At IIFL Wealth, digitisation is a priority as the firm upgrades and as innovative technologies evolve at an ever-greater pace. We have already embraced digital tools in our business. We have digitised prospecting and onboarding of new customers, transaction execution, document signing. Our app-based dashboards and portfolio review mechanisms empower clients and relationship managers (RMs), seamless access to portfolio holdings and analytics. Further, we also recognised that the pandemic has changed the workspace dynamics and that the future is going to be more hybrid in nature. Thus, our operating model is increasingly independent of asset and physical infrastructure, it is cloud-based and digitised; yet, tethered to our core values of human relationships that help engender greater client retention and loyalty.

How has your firm moved from being a traditional wealth manager into a more modern, holistic and strategic role?

Three years ago, we embarked on a journey to create a more resilient and predictable revenue model by adopting the Annual Recurring Revenue (ARR) system which is in line with global practices and followed by major private banks. The aim was to establish an all-in-one fee and transparent model that ensures portfolio management is free of bias. This not only boosts the firm’s revenue predictability but offers clients a better outcome. This is one of the biggest factors that has helped us become a more modern and holistic wealth manager. Our efforts to holistically embrace digital transformation and adopt solutions that can enable product-side innovation, enhance product and service delivery, and create seamless and customised experiences for our clients have been another critical contributor.

Has the digital transformation enabled in delivering critical competencies?

It is important to understand that wealth management is essentially a ‘people’ business. Thus, the role of fostering robust long-term relationships inevitably falls upon our people. Concurrently, digital solutions are playing an increasingly important role in helping foster these relationships. Of course, during the pandemic, we were able to deliver our services to clients and keep the lines of communication open only because we were digitally ready. Yes, so to that extent, digital transformation has enabled us to deliver critical competencies and will continue to play an enabling role in the future as well.

Can you share your view on the future of wealth management in the new normal?

The world and the wealth management industry are undergoing a transition. We are witnessing the greatest wealth transfer in history as wealth changes hands from the baby boomers to the younger generation. Since each generation is a sum of its own experience and circumstance, it is important to recognise that the current generation will treat wealth differently from its predecessors. This means that wealth management firms will need to be agile and mould themselves in response to the changing contours of their clients’ expectations. This would become even more challenging in the backdrop of a landscape where technology will continue to shape how and when you engage with clients. In short, ahead lies a time of a few challenges and great opportunities.

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