Wealth Management in the Digital Age

Wealth Management in
the Digital Age
May, 2016

2WM in the Digital Age | 2016 FIBA Presentation | Capgemini Financial Services
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Disclaimer

Over the past 20+ years I have been helping financial services institutions develop strategic vision and identify innovative solutions to
enhance revenues and improve operations in the fast-paced global financial industry. With industry experience in banking and capital
markets, I have first-hand knowledge of financial standards and market trends to help financial firms leverage capabilities to enhance
productivity and financial performance.
Introduction
Tej Vakta,
Senior Leader – Global Capital Markets
Capgemini Financial Services
Tej.Vakta@Capgemini.com
About Capgemini
With more than 180,000 people in over 40 countries, Capgemini is one of the world's foremost providers of consulting, technology and outsourcing
services. The Group reported 2015 global revenues of EUR 11.9 billion. Together with its clients, Capgemini creates and delivers business, technology
and digital solutions that fit their needs, enabling them to achieve innovation and competitiveness. A deeply multicultural organization, Capgemini has
developed its own way of working, the Collaborative Business Experience™, and draws on Rightshore®, its worldwide delivery model.
Learn more about us at www.capgemini.com.

For over 19 years, the Capgemini’s World Wealth Report has been the benchmark for
leading global wealth management insights
Impact of New
Market Realities
on HNWIs
Changing HNWI
Behaviors
Mid-Tier
Millionaire
Challenge
Offshore vs.
Onshore Capital
Flows
Globalization
and Wealth
Transfer
Change and
Innovation in
Private Banking
Needs-
Based Client
Service Models
Ultra-HNWIs
Meeting Needs
of Growth
Markets
Institution-
Like HNWI
Behaviors
Specialized
Products and
Strategies
Adapting to
New Market
Realities
Europe vs. North
America HNWIs
Change in
Investor Psyche
post Crisis
Leveraging
Enterprise
Value
Developing
Scalable
Business Models
Regulatory
Impacts on WM
Firms and their
Clients
Digital:
The New WM Mandate
Addressing Evolving Role
of Financial Advisor

Global HNWI population grew 6.7% and wealth 7.2%
Global HNWI population
and wealth expanded at
moderate rates of 6.7%
and 7.2% respectively in
2014
Ultra-HNWIs as well as
Asia-Pacific and North
America regions drove the
growth of HNWI population
and wealth
Global HNWI wealth is
forecast to cross US$70
trillion by 2017, growing at
an annualized rate of 7.7%
from the end of 2014
through 2017
Source: Capgemini and RBC Wealth Management Global HNW Insights Survey, 2015

U.S. HNWI population grew 8.6% to reach 4.4 million
Source: Capgemini Financial Services Analysis, 2015
Note: The totals for all years are expressed in millions and the 000s in the chart title do not apply to those numbers; Chart numbers and quoted percentages may not add up due to rounding
U.S. and Top 12 MSA HNWI Population (000s), 2009–2014
Growth aided by markets of West Coast and Texas

HNWI population and Wealth Growth, Gross Metropolitan Product Growth, Real Estate
Growth and Unemployment Rate for Top 12 US MSAs

NA HNWIs’ major concern relates to rising costs and top needs are investment performance
and understanding of needs
Wealth Needs
Top Five Concerns and Wealth Needs of North America HNWIs (% Respondents)
Concerns
1 Rising costs of
healthcare
74.1%
North
America
2
Ensuring my assets will
last throughout my
lifetime
73.6%
Global
68.7%
58.7%
Global
Rank
3
2
4
Being able to afford the
lifestyle I want in
retirement
66.1%
5
The impact of the
economy on my ability to
meet my financial goals
64.3%
62.8%
58.7%
3 My and my family’s health 70.7% 66.2% 1
4
6
North
America
Global Global
Rank
Strong investment
performance
86.3% 72.5% 3
Ability to understand my
concerns and needs 85.6% 72.0% 4
Wealth managed with a
clear understanding of
risk tolerance
84.8%
Timely and detailed
statement and overall
reporting quality
82.1%
Quick and effective
resolution of service
related issues
80.9%
73.2%
69.4%
69.6%
1
6
11
Overall level of concerns and importance of wealth needs higher in North America.

To enable financial advisors, firms need to understand HNWI needs and adapt
accordingly
Path Forward for Firms
UNDERSTAND
HNWI AND
INDUSTRY
DYNAMICS
EVOLVE ADVICE
MODEL TO
RESPOND
INVEST IN
SPECIFIC HIGH-
PRIORITY
CAPABILITIES
ENGAGE, EQUIP,
AND EMPOWER
FINANCIAL
ADVISORS
Foundation Specific Actions
Most Important Firm Capabilities which Financial Advisors believe are
important to fulfill HNWI needs:
 Strong wealth planning Tools – 81% of financial advisors
 Access to firm or 3rd party experts – 72% of financial advisors

Digital Landscape in Wealth Management

Today’s customer is at the center of digital disruption across all industries
Customers Dealing with Digital in their Everyday Lives

Five fundamental forces are driving this even stronger
“Amazon-
ification”
“Google-
ification”
 Google has driven the information
age through an individual’s ability to
find a wide variety of information
quickly, easily, and for free
“Apple-
ification”
 Apple has established the customer
experience at the center of a firm’s
strategy
 Amazon was one of the first firms to
articulate and deliver predictive and
contextual shopping experience
 Facebook drove widespread
adoption of social interactions and
digital presence
Customers Dealing with Digital in their Everyday Lives
1. Information
2. Answers
1. Experience
2. Intuitive
1. Predictive
2. Contextual
1. Social
2. Collaboration
“Facebook-
ification”
 Uber has transformed the meaning
of convenience and customer
experience
1. On-demand
2. Convenience
“Uber-
ification”
Top Two
Words to
Describe

As expected, wealth management customers also have a high demand for digital, led
by younger HNWIs
HNWIs Considering Entire or Most of Current WM Relationship to be Digital Currently
and Five Years in Future, by Age
Source: Capgemini Financial Services Analysis, 2016; Capgemini and RBC Wealth Management World Wealth Report 2015
57%
77%
59%
48%
40%
64%
83%
70%
54%
48%
0%
25%
50%
75%
100%
Global Under 40 Age 40-49 Age 50-59 Age 60+
FutureCurrent
Questions asked:
“To what extent would you say that your wealth management relationship is CURRENTLY conducted through digital channels?”
“In FIVE YEARS, to what extent would you like your wealth management relationship to be conducted through digital channels?”,
and “Thinking about your wider retail experience, to what extent do you CURRENTLY buy personal items, such as clothes or books,
through digital channels?”
u
v
u v

Younger U.S. HNWIs also exhibit higher demand for digital interactions
Questions asked (Digital):
“Please indicate whether digital contact (internet, mobile, email) is more important to you than
direct and personal contact?”
“To what extent would you say that your wealth management relationship is CURRENTLY
conducted through digital channels?”
“If your main wealth management provider could not offer this type of integrated wealth
management experience, would it prompt you to consider moving to another firm?”
u u
v v
w w
u
v
w
Key Digital Demand Differences by Age, Q1 2014 and Q1 2015

However, wealth management firms and industry seems to be lagging behind on the
digital evolution
1960s 1970s 1980s 1990s 2000-2015
Music
Industry
Computer
Industry
Banking
Industry
Wealth
Management
SELF-SERVICE WEBSITE /
LITE MOBILITY APPs

The demand for digital by next generation will help push disruptive financial services
into mainstream adoption
Automated advice represents a huge potential
market for wealth management firms, with
HNWIs alone willing to allocate $7.3mn to
these models by 2017
ROBO-ADVISORS
The global crowdfunding industry raised
$34.4bn In 2015, increasing by 112.3% from
$16.2bn in 2014
CROWDFUNDING
Source: Capgemini Financial Services Analysis, 2016; http://dazeinfo.com/2016/01/12/crowdfunding-industry-34-4-billion-surpass-vc-2016/;
http://www.marketsandmarkets.com/PressReleases/wearable-electronics.asp; http://www.businessinsider.in/THE-PEER-TO-PEER-PAYMENTS-REPORT-The-exploding-
market-for-smartphone-apps-that-transfer-money/articleshow/47114852.cms
The overall market for wearable technology
is expected to reach $31.3bn by 2020,
growing at a CAGR of 17.8% between 2015
and 2020
WEARABLES
The mobile P2P transactions volume is
expected to reach $86bn in the U.S. by 2018
P2P PAYMENTS
The global market for mobile wallet is
expected to reach $2.7tn by 2020, driven by
proliferation of smartphones, internet, and
increasing merchant acceptance of mPOS
terminal
MOBILE WALLET

In fact, more and more fintechs are already targeting wealth management industry…
Wealth
Management
Provision of
Advisory Services
Client
Profiling
Client
Acquisition
SUPPORT FUNCTIONS (IT, COMPLIANCE, FINANCE, MARKETING, ETC.)
Select Examples of Fintech Players Disrupting the Wealth Management Industry

This is how far digital loyalty goes, first official digital wedding on blockchain
Blockchain wedding
First blockchain wedding took place at Disneyland, FL.
David Mondrus and Joyce Bayo registered their wedding
agreement on the blockchain, eliminating the role of both
religious and government officials.
took
Source: Capgemini Financial Services Analysis, 2016 and publicly available sources

… With a lot of demand in the automated advisory area
However, financial advisors seem to be underestimating the demand.
Note: Questions asked: “Would you ever consider having a portion of your wealth managed by an automated advisory service”? “In your view, would your HNW clients consider having
a portion of their wealth managed by automated advisors”?
Source: Capgemini Financial Services Analysis, 2016; Capgemini and RBC Wealth Management, World Wealth Report 2015
49%
76%
46%
52%
70%
33%
20% 19%
16%
32%
14%
18%
0%
20%
40%
60%
80%
Global
Asia-Pacific
(excl.Japan)
Europe
Japan
LatinAmerica
NorthAmerica
PercentageofRespondents
HNWI Wealth Manager
HNWI and Financial Advisor Assessment of HNWI Propensity to Use
Automated Advisory Services, Q1 2015

Bridging the Digital Demand Gap

Advisors and firms are transitioning towards a new landscape with digital at the core
Shifting Wealth Management Advisory Landscape
Focus on behavior-based
segmentation
Use of multiple channels to
provide a seamless experience
across all channels
Delivery of the full capability of
the firm
Growing prominence of fee-
based and discretionary
solutions and utilization of open
architecture
Shift toward holistic approach
to integrated wealth
management including goals-
based performance
management
Digital
Transformation

Firms need to build an effective digital strategy which engages clients and empowers
financial advisors
Effective Digital Strategy
Client Experience Advisor Enablement

Through digital, firms can provide clients with a better experience across three areas
of inform, engage, and transact
Real-Time
Simplified
Collaborative
Multi-Channel
Experience Products
and
Services
Content
and
Education
Performance
and
Review
INFORM
Review
and
Collaborate
Propose
and
On-board
Plan
and
Advice
ENGAGE
Implement
and
Execute
Money Movement
and
Servicing
TRANSACT
HWNIs have high propensity to leave their Wealth Management Firm due to
lack of digital relationship and integrated Channel experience

Select examples and best practices of client experience

According to research from
Nuance, “the leading creator of
intelligent virtual assistants, 58%
of 18 to 25 year old smartphone
users are periodically interacting
with a speech-enabled virtual
assistant.”
USAA was the first financial institution
to deliver a speech-enabled virtual
assistant to its smartphone app users.
Since then USAA is adding more
capabilities for their members across
various types of accounts and services
(including performing transactions and
getting account information)

Source: http://www.kioskmarketplace.com/videos/pnc-branches-out-in-a-small-way-2/

Several leading firms are working on innovative
solution like interactive PDF to drive digital and
taking diversification from an intuitive concept
to a tangible portfolio attribute that can be
measured, visualized, and optimized by
launching a PDF on any device
Next-Gen eStatements

Experience
Through digital, firms can enable advisors across three areas of inform, engage, and
transact
Real-Time
Unified
Contextual
Collaborative
Products
and
Services
Content
and
Education
Performance
and
Review
INFORM
Review
and
Collaborate
Propose
and
On-board
Plan
and
Advice
ENGAGE
Implement
and
Execute
Service
and
Practice Mgmt.
TRANSACT
To enable advisors, firms need to invest in specific high-priority capabilities
and engage, equip, and empower their workforce

Select examples and best practices of advisor enablement
The Global Wealth business of the bank turns
to IBM Watson to help financial-planner
improve their advice

Example of what’s next for advisor enablement
Your Bot in Messenger
Client BOT Engine Your App

Your Bot in Devices

Your Bot in
Robo-Advisor / Virtual Assistant

Select examples and best practices of advisor enablement
Robo-Advisors
Advanced Analytics

Key Recommendations and Takeaways

Firms will need to consider an overall shift in the advisory model to align with the
shifting landscape
Review/
Discovery
of Goals
Plan and
Prepare
Implement
Plan and
Strategy
Review of
Value
Added
Introduction
Current Advisory Model
Current and Evolving Advisory Model in Wealth Management
Evolving Advisory Model
Client
Goals
Implemen-
tation

Digital disruption in wealth management is expected to be driven by Fintechs,
Blockchain, and AI led Robotics in coming years
Real Time
Payments
Digital
Disruption in
Wealth
Management
Blockchain technology has the
potential of automating some
intermediary trusted services
currently performed by banks.
Financial service firms need to
invest in R&D, new
ventures/fintech firms in order to
achieve results complementary to
their business goals
Blockchain
Robos and artificial intelligence is capable of
reducing costs, increasing skills, and
improving customer experience, which might
result in them taking over certain finest
activities currently performed manually in
financial services industry
AI and Robotic revolution
The digital revolution in financial
services industry is on the go, but
the brunt on current players is yet
to be seen. Numerous fintech
firms are challenging banks in
almost every product (including
lending, payments, forex etc.) in
their portfolio
Fintech

In addition to enhancing advisory model, firms/ financial advisors can re-align their
business model in order to adapt to new reality
Evolving Business Model
Model Spectrum
Financial Planning Model
Providing holistic/customized
advice through frequent human
interactions and involves assistance
in risk management, legacy, estate,
and tax planning, and charitable
giving
Hybrid Advice Model
Traditional human touch and
technology advisory services co-
exist within a WM firm, with primary
goal being interdependence
Automated Advisory
Model
Primarily relies on technology to
manage investments, and caters to
HNWIs not requiring the personal
touch.
Digital-Led Financial Advisor-Led
The industry sweet-spot for the majority of firms is likely to be in the hybrid advice model.

Core/Strategic Focus Transformation Focus
Firms will need undergo a digital transformation which can focus on developing a
digital mindset complemented by tactical steps
High-Level Digital Prioritization Roadmap in Wealth Management
Note: Steps do not necessarily need to be taken sequentially
Shift the business mindset
Develop ROI model/ cross-enterprise
support
Make build vs. buy decisions
Implement quick wins
to build momentum
Develop big data and artificial
intelligence opportunities
Partner / Collaborate with FinTechs
Engage and educate financial advisors
Strategic Recommendation Transformation Recommendation

KEY TAKEAWAYS
Key Takeaway 1
Assess your current state and benchmark against your peers across inform, engage, and transact (DMA)
Key Takeaway 2
Identify key client-facing and FA supporting needs to develop a comprehensive digital strategy that simplifies
advisor-client collaboration and drive loyalty
Key Takeaway 3
Embark on your iterative transformation journey
SCAN
FOCUS
ACT

The information contained in this presentation is proprietary.
© 2016 Capgemini. All rights reserved. Rightshore® is a trademark belonging to Capgemini
www.capgemini.com
About Capgemini
With more than 180,000 people in over 40 countries, Capgemini is one of the
world's foremost providers of consulting, technology and outsourcing services. The
Group reported 2015 global revenues of EUR 11.9 billion. Together with its clients,
Capgemini creates and delivers business, technology and digital solutions that fit
their needs, enabling them to achieve innovation and competitiveness. A deeply
multicultural organization, Capgemini has developed its own way of working, the
Collaborative Business Experience™, and draws on Rightshore®, its worldwide
delivery model.
Learn more about us at www.capgemini.com.
Tej Vakta,
Senior Leader – Global Capital Markets
Capgemini Financial Services
Tej.Vakta@Capgemini.com

Wealth Management in the Digital Age

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