Capco Blog

Savvy consumers seek self-directed online investment tools

By, Natasha Leigh Giles and Assad Mahmood

The squeeze on margins in standard wealth management solutions is leading conventional companies to consider alternative solutions to service their clients. With new tax regulations, increasing fee transparency and a general customer dissatisfaction with traditional wealth management services, companies are open to new investment ideas and client service offerings, including self-directed online trading platforms.

Banks’ cost-income ratio has been under significant pressure due to the recent economic crisis and traditional wealth managers are keen to provide value-adding client services that can enhance their profitability. Several financial institutions are investing in self-directed, online trading platforms as a result. For example, one prominent bank is expanding products into the financial exchange margin through a white label partnership.

The move toward online trading platforms evolved due to product innovation and customer expectations. Trading platform functionalities that were previously only available to brokers are now available to anyone via a web-powered interface with a very low “entry” fee. This was not possible just a few years ago, when only heavy desktop applications could cope with the processing time needed to run these platforms. Now, with established frameworks and standard web platform protocols, vendors can offer online trading features that allow response times to be calculated in milliseconds; all end users need is an Internet connection.



Jennifer Cordingley is joined in the studio by Natasha Giles and Assad Mahmood from Capco to discuss self-directed investment.

Today’s savvy consumers view these sophisticated solutions as standard. They expect high up-times and the capacity to trade anywhere, anytime with any device while keeping the latency as low as possible. Previous features that were considered “nice to have” are now mandatory and if end users cannot find what they are looking for on any given platform, they will simply open an account with another broker.

In addition, the barrier to entry for trading online is lower and more information is available on learning how to trade online. Consumers can access “how-to” webinars, podcasts, e-books and online tutorials to learn the ropes and refine their own strategies. They can become “experts” by listening to or watching videos and can then practice their new skills immediately with the instant creation of a demo account. There are even new tools available aimed at calculating the social “mood” on a particular product and predicting the stock market price.

Customer savvy extends beyond learning how to trade online. In response to the recent lack of trust in the financial services industry, a growing number of regulatory initiatives now allow clients to see exactly how much a particular service costs them. Products with built-in fees (such as funds or structured products) are forced to declare the revenue source for the investment manager, and these charges are reported clearly in statements to clients. With easy access to information through the Internet, including price-comparing websites and blogs, customers can analyze wealth managers and determine whether the service they receive is worth the money they pay. However, not all consumers are rushing to the cheaper provider; brand and reputation are still important pricing components.

For traditional wealth managers, sections of the market are growing faster than others. Asia, for example, and their investors are not always interested in the traditional relationship management services in wealth management. If wealth managers want to capture clients from growing or new markets, as well as retain a greater market share of technically progressive consumers, they need to offer new products and services like self-directed online trading platforms to be competitive.

What innovative wealth management investment tools are you using to attract and retain customers? Join the discussion.

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