We have all heard the forecasts that robots will replace 800 million jobs by 2030, but a recent analysis of digital disruption in the wealth management sector shows many high-net-worth entrepreneurs would gladly swap their wealth relationship manager in exchange for better self-service digital offerings.
Earlier this year, a legal AI platform ran a competition in consultation with law professors from Stanford University, Duke University School of Law and the University of Southern California. They pitted 20 experienced human lawyers against an AI system trained to evaluate legal contracts. All read a series of nondisclosure agreements with deliberate loopholes included. The humans achieved an accuracy rate of 85% and the AI, 95%. The humans took an average of 92 minutes to complete the task, the AI 26 seconds.
Meanwhile, there's a new breed of clients who, having made their millions in tech, now ask why their professional advisers are seemingly stuck in analog mode.
As a result, agile fintechs and Silicon Valley giants are using new technologies to cherry-pick high value services and reshape professional services. If the traditional, less nimble incumbents feel they risk being stripped of their most profitable services, they are right. And this is just the tip of the iceberg.
Let’s take a look at the overarching trends set to disrupt the established order.
Generational change in lifestyle and attitude
Over the next five years, millennials will increasingly become the ruling generation. They come with a very different set of attitudes and expectations than their baby boomer parents, demanding better value and faster results.
This next generation will determine the future of professional services for many years to come, and rightly so. Given the technology we now have at our fingertips, why should an annual financial audit take four months to complete and involve so many highly educated, highly paid accountants?
Regulatory environment -- new frontiers
The regulatory environment too has changed, driven by a need for transparency and much greater compliance with complex new regulations.
This has created huge additional overheads for wealth managers in particular, increasing costs and reducing margins. However, it is part of the new reality that services need to be digitally transformed.
Which brings us to technology
Moving from legacy platforms and processes to robo-advisers, AI and next-generation digital transaction platforms, brings new opportunities for professional advisors to get closer to their clients.
So how should the professional services ecosystem react to these multiple challenges?
From the outset, it’s vital to recognize the transformational forces at play and a brand’s critical role in communicating change.
There is no doubt that the professional services sector is facing unprecedented disruption, but most industries are experiencing similar challenges. This should not spell the demise of those traditional organizations who have relied for years on their heritage brands. Instead, this should be seen as a once-in-a-generation opportunity for reinvention.