Fintech on Friday: Wealth managers’ digital strategies due an upgrade

“We clearly have some clients who are very interested in interacting with us digitally, but they only tend to be the most sophisticated investors,” said one decision-maker at a recent wealth management roundtable. 

Another quickly added: “Yes, but in the future, with millennials coming through, and because of the revolution in technology, probably most people will want to have real-time access to their investments.”

It is a representative interchange of the digital dilemma facing the wealth industry. After years of cost-cutting, advisers face a vortex of demands: escalating expectations (not just from millennials) around technology provision, stiff competition from fintech firms who are winning younger clients’ loyalty early on in their wealth journeys, and limited appetite internally to make risky investments into services that will not be used.

No wonder so many advisers see digital as a problem to be managed, rather than an opportunity to be seized.

Scorpio Partnership and FactSet have joined forces to understand how financial advisers can make digital pay in terms of profitability, share of wallet and satisfied clients. Earlier this year, 877 end-investors in the UK, US, Singapore and Switzerland, with an average net worth of $4.88m, were surveyed. The results debunk common industry myths, for example that clients’ digital needs are correlated with their age.

Investors across the spectrum use online platforms available to them from their financial providers. And when it comes to managing wealth, clients demand similar capabilities. Indeed, the research shows nearly nine out of 10 HNWIs have completed some investment activities online.

Four distinct profiles were uncovered – each underpinned by investor attitudes towards technology – to help wealth managers understand their clients’ digital priorities. 

• Early Adopters (43 per cent of the sample), those who like to be the first to trial and use new technology in wealth management.

• Digital Followers (36 per cent), those who become users of a particular technology once it has become well-established.

• Digital Laggards (12 per cent), those who tend to be last to start using new technology after it is introduced. 

• Digital Phobics (10 per cent), those who try to avoid using technology.

Simply put, advisers have focused too much on age-related assumptions and not enough on attitudes – and are missing the opportunity to progress the digital conversation with them. 

Early Adopters, for example, highlight that their platform experiences are unimpressive. Their top pain-point is that the information on wealth platforms is not customisable to their interests or goals (27 per cent); glitches and slow speed are also frustrating (24 per cent). Digital Laggards, on the other hand, feel that platforms tend not to be user-friendly (22 per cent) and offer only a limited range of investment products (20 per cent). 

Fundamentally, clients have come to expect sleek functionality and a seamless user experience from all brands. Wealth management is no different.

To free up advisers and improve efficiency, wealth firms should encourage clients – particularly those who are costly to serve in person – to manage more of their relationship and wealth online, rather than seeking out their adviser. They will – if they have access to relevant and unique insights that support their financial goals.

These insights can take a variety of formats. Cerrith Moore is financial controller of Moneybox, an app that allows customers to invest using their spare change and is targeted at 18 to 35-year-olds. Moneybox believes education is the key to building wealth in an era of low interest rates.

“Customers are served with education pieces via our ‘Featured’ content,” says Mr Moore. “We’ve had good engagement with these resources, because we show our customers quite clearly how it impacts their money.”

Another important area where wealth managers must improve their digital delivery is up-to-date insight. Forty-six per cent say real-time analysis of performance is a priority for portfolio management, while the same proportion feels real-time reporting of their investment positions would be a critical step forward. 

The wealth management industry has relied on a series of assumptions about digital preferences that are proving unfounded in a fast-changing world. Fulfilling the opportunity means addressing pain-points holding clients back and finding ways to entice them to manage their wealth online. It may even mean learning from the new fintech players on the block.  

Tasha Vashisht is senior manager at wealth management think-tank Scorpio Partnership