A lack of commitment to push for widespread adoption of analytics-driven approaches is costing wealth managers in Asia's high net worth segment to lose on up to $45 billion in incremental value, according to McKinsey.

Effective IT-based transformations for wealth managers serving high net worth individuals in Asia could result in an estimated $40-45 billion of incremental value, according to a recent report by McKinsey about the use of analytics in the industry. 

This is equivalent to an improvement of about 25 basis points in a wealth pool of $17 trillion. 

«The wealth management industry is typically seen as embodying old-fashioned values and providing discrete, tailored services,» the report said. «These attributes remain valuable parts of the business, but for many clients, they are no longer sufficient. In a highly connected world, people want faster and more convenient offerings and a cutting-edge digital experience.»

RM Wastage 

While many wealth managers purport to be in the process of transforming their business to embed analytics-related approaches, many in reality still opt for traditional methods.

According to the report, this has resulted in 60 to 70 percent of relationship managers at private banks to be spent on non-revenue generating activities.

Commonly attributed obstacles to focusing non-advisory time include the lack of unified platforms, manual data processing, lack of integrated research platforms and lack of pre-advisory client risk analytics available. 

«Most wealth managers would say they have already embarked on an analytics journey,» the report said. «Often, however, the whole system is less than the sum of its parts, and people remain attached to established ways of working.» 

Analytics-Based Transformation 

McKinsey notes five key elements to a successful analytics-based transformation: setting a leadership vision; plotting the journey for change; building a strong foundation of core technology and data-driven decision-making; building teams intended for such success such as cross-functional units; and institutionalizing ways of working. 

«Early success stories are encouraging, but they are the exception rather than the rule,» said the report, titled «Analytics transformation in wealth management».

«More often, firms have started the transformation journey but have faltered along the way. Common reasons include a lack of ownership at senior levels and budgetary or strategic restraints that prevent project teams from executing effectively.»