CREALOGIX UK CEO, David Joyce, takes a close look at job ads of digitally-native challengers in the wealth space, to reveal the stark nature of the competitive challenge facing the leadership of more established firms.

Here at CREALOGIX our clients are the world’s leading private banks and wealth management firms: we now advise all these established firms to become actively aware of a fast-rising new field of competition… the challengers of wealth. Digitally-native firms such as Betterment, Wealthfront, and Robinhood in the USA, and Nutmeg, Wealthify, and eToro in the UK represent a direct competitive threat to the established industry.

For wealth management firms seeking to stay relevant and build their own distinctive digital innovations, understanding how these challengers are built, and why they appeal to investors, is crucial to successfully prioritising digital strategy.

While all too often dismissed lightly, by the time the majority of incumbents are accepted as competing for the same customers – which is happening rapidly already – it will be late in the game to put together a response.

This is the textbook “disruption” scenario, where low-cost, relatively sparse-featured challengers grow rapidly in the lower value zone of the market and then shoot upwards through the higher value tiers, changing the game itself and leaving behind originally dominant brands which were slow to adapt to the shift in customer expectations.

When researching challengers as a threat and source of inspiration, one quick and revealing exercise you can take is to examine their recruitment ads. (For a list of 50 challengers to track in the UK, contact the Wealth team at CREALOGIX.)

The first discovery is quickly evident from the jobs boards: most of the new challengers of wealth are hiring fast and aiming to grow rapidly in three dimensions: depth of talent (including senior hires from incumbent brands), breadth of services (such as robo-advisory firms building human advisor teams), and geographical reach (almost without exception, the physically unencumbered, digitally-native challengers plan to spread across multiple markets). You can tell a lot about unannounced expansion plans of these challengers via their hiring patterns.

Recently, the recruitment activities of established financial brands show a steep drop-off or even freeze in reaction to the uncertainty of the coronavirus crisis. Meanwhile, many of the wealth challengers seem, if anything, to have accelerated their headcount growth.

These brands, although sensitive enough not to brag about it, have experienced record volumes of signups and new assets as consumers stuck at home figure out new, remote-friendly ways of managing their savings. Many younger people are trying their hand at investing for the first time, sensing the opportunity of a lifetime in stockpicking at the bottom of a market crash.

Digitally-native challengers are built to be scalable and bring on board thousands of new customers without new, human-limited front office costs. The current crisis has directly translated into an opportunity for them.

In contrast to this, in the same time period, established firms have been focusing on how to adapt office operations into tolerable temporary workarounds in lockdown: it has been a crisis rather than an opportunity for growth.

The second point evidenced by the jobs pages of the challengers of wealth is that a high proportion of the positions they are hiring are directly about growth – the word itself crops up frequently in titles e.g. “Senior Growth Partnerships Manager”, “Growth Product Designer”, or simply “Head of Growth”. Marketing positions abound, often outnumbering technical roles: this is a really important thing to understand about the challengers, that while they are definitely tech companies in their DNA, this Silicon Valley mentality also means that the business model only makes sense with scale.

None of that is perhaps too surprising about new, consumer-focused digital brands, especially where many are still in early stages and working through investor-fuelled scale-up plans. However, the point to make here is – what do the jobs boards and indeed business models of established wealth and banking institutions look like? While every business likes to grow, it is hard to find examples of incumbents which are prioritising rapid scaling-up of customer population, let alone exclusively prioritising digital marketing and digital customer acquisition. Leadership in established firms should question why this is the case.

I would argue that for now, the challengers are not sensed as being in competition with the incumbents… because the incumbents are not competing in this space at all!

The final point you will be able to observe from the hiring patterns of digital challengers is that the roles just don’t sound at all like the kind of job positions you will find in established firms.

Look around at the leading private banks or investment firms and I doubt if you will be able to locate a “marcom visual designer”, “crypto product designer”, “engineering manager, customer experience”, “full stack engineer, business automation”, “site reliability engineer”, “behavioural insights researcher”, “financial news curator”, “global mobility partner”, or “talent brand manager”!

Why don’t these roles exist in the established firms, which are often much bigger, well-resourced in the relevant departments, and have considerable ambitions in technology? I don’t think there’s one simple answer to that, but I do think it is worth asking that challenging question.

The latter example from the list above – “talent” – is the third aspect of competitive growth that the challengers bring. These roles are, frankly, the cool jobs which attract top talent into exciting, progressive careers. Some – if not most – of the most skilled, ambitious, digitally savvy people in established financial institutions are going to be drawn away into these challenger brands before the incumbents have a chance to really access their potential for transforming their older businesses from within.

In summary, looking at the hiring patterns of the rapidly growing list of wealth challengers, there are three types of “growth” to think about. Firstly, there is a need to become more focused on growing the customer base, specifically through identifying the huge new opportunities opened up by the digital wealth space, and especially around providing a modern and appealing service to younger generation clients.

While it is crucial to provide a well-designed, convenient self-service experience for existing private clients, simply keeping them loyal is not enough to grow the business. Digital services must be strong enough, and put inside a strong enough marketing strategy, to be able to attract healthy levels of growth via new clients coming on board.

This connects with the second point about growth being demonstrated by the challengers in terms of investment in marketing. The design of the service must be scalable and ready to bring more clients on board without linearly increasing front office staff and administration costs… but excellent software is not sufficient for generating growth. The roles required to generate this growth encompass a wide range of modern marketing and customer success skillsets (and resources), not just technical software and IT roles.

Finally, a refreshed business model for the firm places customer experience, digital services, and growth at the top of the agenda. The people within your teams who already “get it” and can help drive the digital future of the firm must be empowered as soon as possible. Enacting this empowerment is probably the highest leverage strategic activity which leaders in established firms can undertake: in other words, instead of trying to become technology or digital experts late in their executive careers, leadership need to find the people who already work with them who want to make it happen, and unshackle them.

As digital transformation proceeds, you should also see substantial change in the scope and responsibilities of roles across your organisation: this should be welcomed, as it will generate positive feedback in building your team. Along with the overall modernisation of the brand image for your customer, you should pay attention to making yourself attractive for prospective employees who care about both technology and business growth. It should be possible to say this about everyone in your organisation, regardless of specialism.

Taken together, these strategic changes will enable established brands to retain and attract the wide range of talent they need to adapt outdated business models, survive the first waves of disruption, and perhaps show the challengers a thing or two about how globally-leading financial brands can succeed at innovation too.

David Joyce is CEO of CREALOGIX in the UK. David drives our vision of product innovation and champions the closely collaborative delivery approach which has been valued by our wealth management and private banking clients for over two decades.

More than 550 banks and wealth management firms worldwide are able boost their business growth and profitability by leveraging CREALOGIX software to modernise and continuously improve their end users' digital customer experience.

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