The luxury sector has much to teach private client wealth management about ideas of service and customization, particularly as digital channels become more important.

Consumers of luxury brands – such as high net worth individuals – don’t need to make a false choice between personalized services and privacy when services are put on digital platforms, the Luxury Institute says in a report.

With cyber-security attacks an ever-present worry for wealthy individuals and the firms that serve them, the issue of how to square convenience with privacy remains a tough one.

The Luxury Institute, an organization tracking broad trends in the sector, has issued a report, From B2C to Me2B: The Essential Convergence of Privacy and Personalization.

“The operating assumption is that individuals need to compromise their data, and their privacy, in order to get `free’ services and personalization. That is a false choice. The reality is that the Big Tech ecosystem is only the first chapter in the life of the internet. The existing model has too many downsides to remain viable,” the Institute said in a report. “Emerging forces are converging to decentralize the internet, freeing it up from its dependency on tech giants. These forces are not visible to the naked eye today. When they converge, they will reverse the current B2C [business to client] model, and will empower consumers and legitimate goods and services sellers to evolve into mutually beneficial Me2B business relationships.”

While pitched at the luxury sector, the report is relevant for wealth managers because in certain ways – as this publication has been told – they are sometimes seen as part of this “luxury” field. Indeed, ideas about branding, client service and providing certain experiences are subjects where luxury firms have much to teach wealth managers.

“Google and Facebook today are the poster children for exponential Big Tech growth and profitability. However, in 2019, history is reaching a point where citizens, politicians, and a growing chorus of business and legal experts, denounce these companies, and their peers, as dangerous monopolies,” the organization said. 

“Unfortunately, for legitimate goods and services sellers, the anger inspired by Google and Facebook damages all brands that are part of their ecosystem. Sellers that buy digital ads bear the ultimate cost, including the rampant waste of marketing budgets driven by a combination of fraud, fake metrics, growing ad blocking, low single-digit response rates, and unsustainable customer acquisition costs.

The biggest cost is the loss of consumer trust that destroys long-term relationships,” it said.

The report makes a number of predictions: Privacy regulation will increasingly protect consumers; consumers will own and control personal data; fiduciary platforms will emerge to steward individual consumer data; incumbents will change their business models or become irrelevant and incumbents will change their business models or become irrelevant.

Change is coming
“The European Union is leading in privacy protection. It requires companies to inform data subjects as to what, how and why their data is processed. Personal data can only be collected for legitimate business purposes. The data must be encrypted and companies must prove compliance. California has followed Europe’s lead,” the report said.

“Now the [US] federal government is getting into the act. There are efforts to develop voluntary compliance standards such as the Me2B Alliance and Fair Trade Data efforts, akin to Fair Trade coffee and diamonds. Legislation is only one solution. Beyond laws, there are much bigger win-win-win digital opportunities ahead for sellers, buyers and platforms,” it said.