Despite the challenging business climate, wealth management companies have significant opportunities to stake out new positions and enhance their customers' experience.

As we all know, these are hard times for investors. The stock market correction during the summer was brutal, dashing hopes that the markets had finally turned a corner. Several persistent macroeconomic forces are shaping this reality: the U.S. economic climate, with low growth, high levels of unemployment, and low home prices; the European debt crisis, which alternately simmers and boils; and fears of asset price bubbles in the emerging markets and commodities. What’s more, monetary and fiscal policies in the U.S. bode ill for savers and investors. Interest rates are minuscule, and taxes on dividends and capital gains are likely to rise as the U.S. is forced to cope with budget deficits and entitlement programs.

Investors seem to have no place to hide, no safe haven. Many are adrift, uncertain about where to put their money and whom to trust. They need sound advice like never before, but they have been badly burned in the last four years and their patience and trust have worn thin. This skeptical attitude is hardened when blue-chip investment managers make high-profile wrong bets that garner substantial media attention.

But if being an investor in this climate is challenging, so too is operating a wealth management firm. Top-line growth is elusive even as a new regulatory environment is driving up compliance and risk costs. As grim as this picture is, we believe that wealth management firms should resist the temptation to batten down the hatches and wait for the storm to blow over. In fact, we see two rare and significant opportunities for those firms willing to brave the adverse conditions: the first is to exploit rivals’ vulnerabilities and stake out a new competitive position in an unusually fluid market; the second is to use emerging technologies to significantly enhance the customer and advisor experience.

As noted, investor satisfaction is at an all-time low. Although generally skeptical after four tough years, investors are still searching for new ideas and are more willing to test new relationships. Now is an ideal time to pounce on competitors’ vulnerabilities and peel away clients. For example, trust companies, which have a reputation for conservative investment philosophies, can explicitly target the clients of private banks that have lost money on opaque, capital markets–based structured products.

It’s also a good time to capture talent, which, like customers, is available and open to change. Some advisors are unhappy about the way their firms treated them in the early years of the financial crisis, others might come from adjacent industries such as investment banking, and still others might be willing to try a different sales format at a different type of wealth management firm — for example, moving from a broker/dealer to a private bank, or from an RIA to a wire house.

Overall, this more fluid wealth management environment means that the competitive positions of long-entrenched wealth management firms are less secure. But money alone will not lead an advisor to leave his or her current employer. To change firms, advisors need to believe their clients will be better served and they will be more successful at the new firm with its different platform and value proposition. To attract new talent, wealth firms need to clarify their value proposition for clients and advisors and pursue this opportunity aggressively and creatively.

Coincidental to the economic and financial woes creating this fluidity in the industry is the emergence of new technologies that can significantly improve the client and advisor experience. Investing in these technologies is the second major opportunity we see in today’s environment. The danger is that wealth management firms struggling with top-line revenue growth and increased regulatory costs will under-invest at this critical juncture. We believe that could be a grave long-term error.

New technologies that have been slowly developing over the past two decades seem to have reached a tipping point and now have the potential to transform the relationships that wealth management firms have with their clients. Tablets and other new devices have sprung up, along with rich interfaces and new displays. Clients can access a wealth of information in real time, and firms have new tools to gain client insights from a trove of unstructured data that had previously been too difficult to tap. Networks, including 4G, are more powerful than ever, and new infrastructure, notably public and private clouds, allows firms to run their operations and engage with clients in innovative and more efficient ways.

These new technologies are powerful and worth investing in because they can elegantly address four principal customer “pain points” that have dogged wealth management firms for years:

• “It’s a hassle”: Dealing with a financial firm is risky, complicated, and time-consuming. For instance, statements are confusing, service is often inconsistent, and processes like client onboarding and opening new accounts can be cumbersome
• “I’m undervalued and exploited”: The person gets impersonal treatment and little recognition. An example would be high-net-worth clients not getting the high-touch services they expect or their financial advisors not being aware of their banking transactions with the parent company.
• “I’m in the dark”: The customer is not in control or empowered to make decisions. For instance, customers don’t have access to real-time information and advice, or performance reporting is difficult to understand.
• “I’m on my own”: The customer gets no help engaging with friends, peers, or family on financial matters. Generally speaking, wealth management firms have not empowered their clients or relationship managers to take advantage of social media capabilities and connections that are widely used by investors in their personal lives.

By taking emerging technologies and applying them to these pain points, wealth management firms can change and enhance the customer experience — and the advisor experience as well. It’s possible to envision a future where the relationship between the client and the firm is personalized and the client has access to advice and information on a continual basis; where clients and advisors use a rich user interface — intuitive, paperless, and digitized — to communicate with one another and the firm; where the client’s connection with the firm is fast, always on, and full-service through multiple channels; and where these engagements are collaborative and secure — possibly with peers as well as advisors — using social media. (Click here to see a demonstration of how a client and advisor could discuss and execute a stock trade via a real-time video interface as important news is breaking.)

There will doubtless be regulatory considerations in how advisors interact with their clients, but there is little doubt that these and other new technologies will fundamentally change the nature of this interaction. So what should a wealth management firm do to reach this enviable future state, given that investment resources are limited? First, it must exercise discipline and focus in choosing which opportunities to pursue and where to invest in technology. That is no mean feat. The range of products to consider across the entire technology stack, from devices and interfaces to networks and infrastructure, is formidable. And within each element of the stack are still more layers of complexity. How do you make sense of this universe of new technologies? How do you prioritize opportunities and investments?

In our view, a sound methodology starts by clearly articulating the client pain points. Next, stitch together technology solutions across the stack in a way that aligns with those pain points, thereby using them as a guide to choosing and prioritizing opportunities and investments. This process helps the company invest appropriately in the right capabilities. With careful planning, the result will be a transformed client and advisor experience enabled by a digital, lower-cost, and more flexible operating model.

A fundamental question is how to balance innovation and practical implementation. In response, we offer these five guiding principles:

• Solve real pain points for customers by deploying new technology;
• Collaborate with third parties to obtain new technologies;
• Recognize what the future might bring while grounding near-term actions in reality;
• Make the tough decisions to rationalize the ongoing project portfolio (no “sacred cows”); and
• Ensure that innovation business cases are realistic and yield results incrementally.

This is a challenging time for our industry, but it is also rich in opportunity and promise. We believe that firms can take advantage of general investor dissatisfaction to challenge competitors, exploit their difficulties, and claim new competitive positions. Coincidentally, new technologies are maturing that can create new standards for the client and advisor experience. These technologies also have the potential to transition the entire operating model from an industrial one (with multiple branches, lots of paper, and branch-based compliance) to a digital, low-cost, and flexible one that enables richer client and advisor experiences. We believe that firms that invest to harness these new technologies, even in this depressed environment, will benefit hugely when markets recover.

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