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Can wealth management companies adapt to the new digital reality?

David Barks Senior Director 07/05/2020

MillionaireVue Q1 data: 7th May 2020

How wealth managers serve clients is changing and, with the impact of lockdowns due to the global COVID-19 pandemic, remote contact is currently the default whether that’s through personal phone conversations or digital means.

Face-to-face meetings have been the bedrock of traditional wealth management in America and Europe. And given most WM clients in the West are over 60, how the current situation is affecting this core client group may be a vital sign of the future of wealth management servicing.

Satisfaction with digital services tends to rise with the wealth of clients.

In March, when China was in full lockdown and the UK and US started to follow suit, we surveyed more than 1,500 wealthy individuals across these markets using MillionaireVue, our quarterly omnibus of high net worth individuals (HNWIs). We asked them about their satisfaction with their main financial provider’s online / digital offering to understand how far wealth managers need to go to meet client needs.

Satisfaction levels differ massively between markets

Satisfaction with digital services are highest in China – 86% are satisfied. This is unsurprising given their digital-first approach and the relative youth of the wealth management industry. The country is also a global leader in mobile payments, digital consumer finance, and online insurance amongst others. And specifically in wealth management, Ant Fortune and Lufax, amongst others, have exemplary online and mobile capabilities, offering investor education and robo-advisory services.

In the UK and US, the proportion satisfied with digital services from their main wealth manager sits at two in three. In fact, in both markets, around 1 in 10 clients are dissatisfied with their wealth manager’s digital service compared with just 2% in China. Clearly there is an issue with the quality of digital services in two of the leading wealth markets in the world.

We also measured the HNWIs’ overall satisfaction with their main wealth manager. Our data shows that in China, there is no difference between the satisfaction levels overall and with the digital services. Whereas in the UK and especially the US, satisfaction with the digital offer lags behind their perceptions of their main provider overall.

Across all three markets there is a strong positive correlation between overall satisfaction and digital satisfaction (r=0.64). And while this doesn’t prove causation, this is consistent within each market. As such, it’s clear that wealth managers around the world cannot disregard their digital services.

The importance of personal contact in wealth management

The difference between overall satisfaction and digital satisfaction in the West may therefore be because personal contact remains the underlying basis of traditional wealth management. At least two thirds (72% UK, 65% US) value personal contact with an adviser more than a high-quality digital-only offering. In China, the foundation of wealth management is a combined online-offline model. For example, CreditEase has an award-winning service that includes relationship managers stationed throughout the country to serve high-net-worth investors, as well digital tools. This meets the very clear demand in China for personal contact; 90% of HNWIs are willing to pay more for a service that gives them access to a named individual.

It’s also fair to say that China’s HNWIs are demanding of their wealth managers digital services. Four in five (83%) in China say that their provider could improve their online / digital offering. And this is higher than in the West, where around half to two-thirds believe their provider could improve their digital offering (62% UK, 48% US). But if in China they’re so happy with their digital service, why do they demand more?

In China and increasingly so globally, it’s common to use multiple providers. This wider range of options and experiences may have the simultaneous effects of raising expectations of what’s digitally possible and receiving market leading digital services. Certainly, satisfaction with digital services tends to rise with the wealth of clients.

It does seem though that wealth managers in the West are rising to the challenge. In the US, there’s been a huge increase in investment in digital-only investment providers and the augmentation of traditional services. According to BCG, from 2013 to 2018, WM-related equity funding grew from $245 million to more than $1 billion globally. Betterment and Wealthfront for example, attract customers who desire online access and convenience, and in the process have accumulated $10 billion in AuM. In addition, traditional wealth managers such as Morgan Stanley and Goldman Sachs acquired Solium Capital and United Capital respectively to expand their digital offers in 2019. And Goldman Sachs also announced the upcoming launch of robo-advisory services in 2020 on Marcus, its retail digital platform targeting Mass Affluent individuals.

Given that in all markets, personal contact remains more important than digital for most clients, this marrying of the skills and qualities of traditional wealth managers and FinTech companies with their technological prowess, may be the way that the industry in UK and US can move forward.

Looking to China may be a useful benchmark for how to provide the best combination of interaction channels. But it remains to be seen whether the requests for improved digital services will be accelerated with the impact of lockdowns. What is clear is that wealth managers that rely only on their non-digital services may find themselves facing difficulties in meeting all the information and communication needs of their clients in these strained times.

Get in touch to find out how you can access the opinions of high net worth individuals with our MillionaireVue service.

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