Legacy finance companies: Had their day or life in the old dogs yet?
It’s an interesting time for the wealth management industry. Many of the more traditional companies in this space are still operating on big, legacy IT systems. They’re watching on as new ‘fintech’ companies spring up all over with innovative business models and different ways of working. The question many people are asking is have the big boys had their day? Or is there life in the old dogs yet?
I recently attended the Platforum D2C + Digital Conference (platforum.co.uk/d2c-digital ) in London and this was the very question on many people’s lips. My own view – and what seemed to be the general consensus among speakers and delegates – is that it’s a time of huge opportunity for these legacy companies.
Digital is transforming the way companies engage with customers and, similarly, the ways consumers engage with their finances. Legacy companies already have the large customer bases required for success. If they can harness new technology and reach out to their customers, there is nothing to stop them capturing massive market share.
I believe the companies that will thrive are those that that won’t rush into a digital strategy without thinking about what their customers really want. There’s value in forgetting about the technology and strategy initially to focus almost exclusively on one simple thing: to get the best outcome for customers. This means talking to customers, looking at what competitors are doing and how customers are interacting with all different types of company. These interactions have changed are continuing to do so. People today are time poor but distraction rich. If a company can grab a customer’s attention for five minutes via a channel that makes it fun and easy to interact, they’re on to a winner.
The new fintech companies have brought with them solutions that have shaken up the status quo. They’re giving customers simple ways to manage their investments (take wealthify.com and nutmeg.com as just two examples). They’re engaging customers in all manner of different ways, from real-time chat backed by algorithms and AI through to providing ‘robo’ or ‘cyborg’ advice and neat interactive real time ‘nudges’ to ensure customers are on track with their investment goals. And they’re not going away. Last year, it’s estimated that UK fintech companies raised $1.5bn in funding . But legacy companies have a big advantage in the data they already hold. If they can enable integration to this via an open API-driven architecture, there’s no reason they can’t offer propositions that are as equally compelling as those offered by the new kids on the block.