Digital investing tools are changing the ways financial advisors connect with investors and will impact how investors use their advisors in the future, according to a report by Accenture.
The report is based on a survey of 1,200 middle- and high-income, digitally savvy European investors, which Accenture refers to as "Generation D."
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The study found that investors value digital financial planning tools that offer investment education, advanced planning and scenario analysis, suggesting that wealth management firms that provide these tools and alter their business models to better serve both traditional and autonomous investors will come out on top.
According to the survey, 27 percent of investors have switched firms to receive a new digital tool or service.
The survey also showed that digital tools that offer education on long-term goals, retirement planning, estate planning, auto asset allocation and a 360-degree account view are considered "difference makers" that may drive an investor’s decision on which firm to select.
Among the high-net-worth investors who were surveyed, 25 percent said they would consider switching their institution if they did not receive a desired online tool or service.
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By GlobalDataAccenture’s Capital Markets practice global managing director Owen Jelf said, "Investors are relying more heavily on digital tools to help them better understand investment trends, decisions and potential outcomes. European wealth management firms have tended to be more reluctant to bring digital tools into their service offerings, focusing their efforts instead on helping to build personal relationships. Our research shows that firms that integrate digital tools into their business models will help strengthen these relationships rather than threaten them, and in fact help them attract the most lucrative investors."
The most popular digital tools among investors are those that reduce the cost of transactions and fees (60%) followed by those that improve access to their account (50%) and improve access to their advisor (32%, underscoring the client demand for a blend of digital and advisor support tools.
The report shows that the relationship between Generation D investors and their advisors is evolving into a "counselor" approach as investors increasingly become comfortable conducting their own investment research, rather than the advisor creating an investment portfolio that the client simply signs off on.
Accenture Wealth and Asset Management Services in Europe, Africa, Middle East and Latin America managing director Alfredo Avila said, "European investors are becoming more autonomous and increasingly working with their advisors in an unconventional way – using them as counselors to run investment plans by, rather than as investment managers. Firms need to embrace the changing relationship model and empower their advisors with digital education and financial-planning tools that add value and enhance the overall investment experience. These tools will not replace the role of the advisor, but rather help investors understand the advice they are being given and increase their level of trust."
The majority of investors still prefer more traditional communication channels when interacting with their advisor, regardless of the various digital options available to them.
Seventy-one percent of survey respondents said they prefer face-to-face meetings with their financial advisor, while 68% prefer phone communication over digital and social media channels.
More than two-thirds of investors (68%) do not agree that a digital-only relationship with their advisor would be effective.
Forty percent of millennial respondents (ages 22-32) described themselves as "conservative" investors, compared with 23% of Generation X (ages 33-47) and 34% of baby-boom respondents (ages 48-65).
Only 21% of millennials said they are knowledgeable about investing, nearly 20% lower than baby-boomer and Generation X respondents (38%).
Millennials, particularly those in the affluent and ultra/high-net-worth wealth bands, expressed a desire for digital educational tools, with 38% "very" to "extremely interested" in learning more about investing in general, and 43% interested in gaining a better understanding of investments and investment strategies.
In addition, while the survey shows that millennials are the least trusting of advice and express low satisfaction with financial advisors, they also express the highest need for advisor contact.
Avila added, "Providing investment education has tremendous downstream benefits for wealth management firms. Our research shows that more informed investors tend to be more aggressive investors. For example, millennial respondents who claim to be more knowledgeable in investing are three times less likely to identify as conservative than their less knowledgeable peers. Firms that integrate do-it-yourself digital tools, such as gamification and simulation modules, as well as advisor-led online education, will be best positioned to serve the growing number of Generation D investors."
