A new report spells out a stark warning for wealth management firms.
For those firms which don’t respond now to the ‘digital wave’, they will not survive in the medium to long term.
The report is entitled ‘Sink or swim: why wealth management can’t afford to miss the digital wave’, and is published by PwC.
It shows that just a quarter of wealth managers offer digital channels beyond email. They contrast this with 85% of High Net Worth Individuals (HNWIs) who use three, or more digital services in their day-to-day lives. They also highlight the fact that more than two thirds (69%) of HNWIs use online/mobile banking and more than 40% use online means to review their portfolio, or investment markets.
Another fact is that only 39% of HNWIs are likely to recommend their current wealth manager.
The report’s main conclusion is that wealth management is one of the least tech-literate sectors of the financial services industry and is falling well behind other industries.
The findings are based on a survey of wealth relationship managers, CEOs, FinTech innovators and HNWIs. The figures revealed that over half of HNWIs surveyed by PwC believe it is important for their financial advisor, or wealth manager, to have a strong digital offering. This proportion rises to almost two-thirds among HNWIs under 45. Some 47% of HNWIs who do not currently use robo-advice services would consider using them in the future.
The report also revealed that just one in ten wealth managers employs social media with their clients, and many are only now investing in web portals and basic mobile apps. And, that two-thirds of wealth relationship managers do not consider robo-advisors a threat to their business and repeatedly insist their clients do not want digital functionality. This, say the report, directly contradicts the importance their clients place on it.
Global asset and wealth management leader at PwC Barry Benjamin said: “This conflict within wealth management firms, combined with a client-base that feels only weak affiliation to its chosen providers, is creating a sector that is now acutely vulnerable, to digital innovation from FinTech incomers, including robo-advice services.
“Ignoring this state of affairs is not an option. If firms do not respond now, they simply will not survive in the medium to long term.”
PwC believes that in order to survive, wealth management firms must accelerate efforts to adopt a comprehensive digital infrastructure; harness the potential of digital to realise greater efficiencies; and, be willing to partner strategically with FinTech innovators.
UK wealth management leader at PwC Andrew Hogan said: “Wealth relationship managers enjoy high levels of trust among their client base. They are already recipients of a depth and breadth of data and insight spanning both financial and non-financial aspects. Any future wealth management model needs, without question, to retain this human aspect.
“However, in an increasingly complex world where the investment office may, for example, have to evaluate more than 200 different investment products for a client, and where clients are also aware of what automated technology can do in the investment advisory space, technology will be vital to keep the job both do-able and scalable for a growing audience.
“Firms that embrace and seize the digital opportunity now are in a powerful position to deliver propositions of real and sustainable future value which combine the very best of technological and human capital.”