Just under half of wealth management clients under the age of 55 “have considered switching, or already switched, wealth managers in the past”, says a new report.
Of the 272 investors surveyed by Aon (formally Scorpio Partnership) for Appway, 23% of those over the age of 67 said they would switch wealth manager. However, that figure more than doubled to 49% for HNWIs aged below 55.
Indian HNWIs are the least loyal: 30% said they had switched wealth managers in the past. The figure was 18% for German and 12% for UK and US HNWIs.
Over a third said they ditched their wealth manager due to high fees and 31% cited “weak investment performance”, according to the Innovate to Succeed: The Client Call to Action for Wealth Management report.
“When I look at client satisfaction, the pain-points are usually costs and performance. These are chronic issues,” one interviewee noted.
This sensitivity around wealth management fees affects younger HNWIs who are more likely to be in the process of creating their wealth: 54% of newly wealthy customers emerge before the age of 45, the report found.
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Add to that a more digital market and an increasing number of wealth managers and it is small wonder these HNWIs switch, says Arndt Mielisch, marketing manager at Appway. “There’s more supply on the market and onboarding processes are easier.
“New investors are more critical in many respects. They have broader criteria which to place wealth managers against.”
The Amazonification of wealth management
When asked “which kind of tech business model should inspire wealth firms”, HNWIs in the Aon/Appway survey pointed to Amazon.
This is a marked contrast to previous years the survey has run when respondents pointed to Apple (2011) and Google (2016).
“The first inspiration from the tech world was Apple because it produced a great user experience”, says Mielisch.
“The next step would be to deliver more than interactivity: Personalised products offering contextualised information and relevant educational content which investors would be looking for”. Google, says Mielisch, fits this demand.
“The third stage is a one-stop-shop where different products and services come together”.
It is this stage where wealth management clients are at today, says Mielisch. A “marketplace-styled” wealth management service allows clients to adapt: 80% said they anticipate their investment strategies to be different in five years’ time.
In order to create this marketplace-styled wealth manager of the future, the report says firms “can and should develop partnerships to provide these services rather than attempting to deliver capabilities in-house.”
“Working with an individual wealth manager would then bring advantages of access to an ecosystem of relevant adjacent services”.