HNWIs are becoming progressively more demanding of digital channels. Andrew Hogan, UK wealth management leader at PwC, suggests that senior executives are fully aware of the consequences of not innovating in digital, yet front office staff are in a state of denial – resting on the laurels of the traditional relationship. John Schaffer reports
A report by PwC reveals that just a quarter of wealth managers offer digital channels beyond email, in contrast to 85% of High Net Worth Individuals (HNWIs) using three or more digital services in their day-to-day lives.
The report, Sink or swim: why wealth management can’t afford to miss the digital wave, which surveyed 1,000 HNWIs and 100 relationship managers (RMs) globally, indicates that wealth managers and private banks are not meeting the digital requirements of their clients.
PwC’s report reveals that 47% of HNWIs under 45-years who don’t use robo-advise services would consider using them in the future. The lack of digital provisions is also causing low client advocacy rates amongst clients. Only 39% of the surveyed HNW clients would recommend their current wealth manager, falling to 23% amongst UHNW clients with $10m+ in investable assets.
Andrew Hogan, UK wealth management leader at PwC, tells PBI that one of the most surprising findings from the survey is that senior executives are fully aware of the industry’s incompetence on the digital front, and are aware of the consequences.
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“The CEOs recognise that if they don't take a longer term view and don't modernise through digitisation – there is going to be either detriment from within, because the cost-to-income ratio and the operational aspect of running a private bank or a wealth management organisation will suffer in the longer term through lack of modernisation and digitisation, but also through competitive pressure. These pressures can either come from within or from outside competitors who will create propositions and offerings to HNWs that are just fundamentally more appealing and akin to the needs and aspirations that they have.
"Clients are highly digital in all other aspects of their lives, and yet when they interact with their wealth manager, they are underwhelmed. The experience they get by channel, by service and by product is in many ways not up to their expectations."
Hogan says he thinks it’s “interesting” that relationship managers (RMs) are in a “slight state of denial”. “They gave us feedback that – this is a personal relationship, we're not sure digital really has that big of a place. That lack of awareness of what their clients want could be a potential problem in the future.”
The PwC report indicates that digital technology is already being used by HNWIs for a significant portion of their wealth management needs. Approximately two thirds (69%) are using online and mobile banking and over 40% use online means to review their portfolio or investment markets. Over a third of HNWIs are using online services for portfolio management. Demand for finance related technology is similar across younger and older HNWIs – with the exception of portfolio management where under the 45s are markedly more interested in managing their investments online.
Although there is a clear demand for digital channels amongst wealth management clients, two-thirds of RMs do not consider robo-advisors a threat to their business and repeatedly insist their clients do not want digital functionality – directly contradicting the importance their clients place such services.
“A lot of what passes for digital, currently, is nothing more than a statement and a little bit of email. What we're talking about is multi-channel, digitally rich insights into portfolio and markets. These are things that we know HNWIs value,” Hogan tells PBI.
The complacency of the wealth management industry is causing low client advocacy, with only a third of wealth management clients claiming to be “very satisfied” with their chosen firm’s service.
However, Hogan believes that roboadvisers are not in a position to completely disrupt the industry, as he suggests that a hybrid model between digital and traditional relationships will become more commonplace.
“Roboadvisors are not disrupting the industry in the way that some commentators have speculated. I don't think there will be an enormous segment of people who will go pure robo all the time.
"I think what robo offerings have shown is that there are people in the market that are more inclined to use digital channels, but it also demonstrates that for some, particularly for investment decisions, they appreciate a blend of human and digital elements when it comes to advise. We are already seeing people starting to experiment with hybrid models that would potentially blend the best of both worlds. If you look across an investment customer journey, there might be elements that lend themselves well to digital, such as research and forecasting tools.
"A large number of consumers have told us that there will still be a value associated with being able to get a human element of recommendation or advice – but that doesn't necessarily mean face-to-face in an office. It could be via telephone, via chat, via video, and digital has a way of broadening the number of interaction channels that a wealth manager can have with his client.”
Hogan tells PBI that there have been various reasons why the private banking industry, particularly, has been slow to digitise – including demand from clients being low up until now.
“This industry has been faced with quite significant regulatory changes and loads of fines. There's been an enormous demand on the scarce recourses that they have to invest and, over the last five-to-ten years, a lot of that money has been invested towards risk, regulation and compliance. It doesn't leave a lot of extra investment resource in order to digitise.
“Partly the other reason is a bit of inertia. Up till now, there hasn't been a lot of demand from clients who are explicitly switching because they can get a digital offering that's better elsewhere. But based on our report, we think that's something that could change in the future.”