Wealth managers overestimate their skills and face digital disconnect

30 June 2016 Consultancy.uk 5 min. read

Wealth managers seeking to please their HNWI clients may need to consider how changes in demographics are affecting expectations around technology. As it stands, many wealth managers remain behind the curve when it comes to providing clients with digital offerings.

The number of people with investable incomes above $1 million, collectively known as high-net-worth-individuals (HNWI), has continued to grow in recent years. At the end of last year there were approximately 13 million HNWI, with 4.1 million of them resident of the US (during the warm months at least). While some of the HNWI became such through careful wealth management, others need someone to make sure that the capital, at least, is protected.

One means of managing wealth is through professional services providers. Wealth managers, operating under a range of different fee structures to suite themselves or their client, will work to support the lifestyle of the rich, and possibly famous. A new report from PwC, titled ‘Sink or Swim: Why wealth management can’t afford to miss the digital wave’ considers HNWI’s relationships with technology in light of the offerings provided by wealth managers.

HNWI attitudes to technology

Tech enthusiasts
As the number of millennials and generation Xs with wealth, and sometimes vast wealth, increases, new attitudes and ways of thinking related to their respective generational time periods begin to affect how the money is spent as well as how they believe it should be managed. One significant change relates to growing up with, and regularly engaging with, digital technologies – from smartphones to smart yachts.

The research highlights that, in terms of confidence with, and enthusiasm for, technology, considerable differences can be found between age groups, as well as regions. Those under the age of 45, for instance, are much more confident and enthusiastic about technology, at 75% of respondents apiece; by contrast, in the 45+ group, only 50% are confident with technology, and around 45% are enthusiastic about it. Regionally, APAC has the highest levels of confidence and enthusiasm, at around 60% each.

HNWIs using digital for financial management

Using digital
The research further highlights how various age groups have taken to the rollout of digital channels for financial management. The under 45s are better represented in almost all digital activity categories, although for the most part uptake is relatively close across categories. The under 45s are, in particular, more likely to use online/mobile banking, as well as perform online portfolio management and leverage digital for tax efficiency.

Feelings about apps/websites using personal dataPrivate wealth
The research also finds that those under 45 are more likely to have positive feelings about apps/websites, from wealth managers, using their personal data, with around 70% positive compared to 30% negative. The 45+ segment, has a more cynical interpretation of how their information is leveraged, with 40% positive and 60% negative. Those that see themselves as technologically confident and enthusiastic are much more likely to feel safe with the use of technology. Respondents from North America and Europe are the most suspicious about online technology in relation to their wealth, at between 40-50% being positive.

Importance of digital

Meeting digital
The research also finds that the younger generations are much more likely to think that strong digital offerings from wealth managers is important, at close to 70% of respondents vs around 55% of all respondents. HNWIs in North America were the least enthusiastic, while those in the APAC were the most enthusiastic by region. Technological enthusiasm and confidence are also found to align with a desire for a strong digital offering from wealth managers, both at around 70% of that type of respondent.

The researchers note, however, that there is a considerable gap between the expectations of the new generation for digital offerings related to the management of their wealth, and what is being made available by the wealth management firms as offerings. The report states: “At the same time, many relationship managers dangerously overestimate their firm’s digital capabilities. Some rate their business as digitally advanced when the only service offered to clients is a website. Low digital literacy throughout the sector means that most relationship managers cannot perceive their adoption of technology extending beyond tools to reduce their administrative burden.”

Another recent report on the wealth management industry, conducted by accounting and consulting firm EY, found that digital channels are one of the key growth drivers in the landscape.