Globally, up to US$200b in revenue may be at stake, as 40% of all clients surveyed are open to switching wealth managers under the right circumstances, according to EY’s 2016 global wealth management report The experience factor: the new growth engine in wealth management. Firms that fail to make strategic investments to deliver a superior client experience may risk losing a substantial portion of their current business, the report finds.
The vast majority (73%) of clients surveyed have relationships with multiple wealth managers. Fifty-seven percent of those would be willing to consolidate their assets with fewer wealth managers for various reasons, including “better pricing,” “better portfolio returns,” and “breadth of products and services.” While some of the motivations may sound familiar, what clients actually mean when stating these reasons has changed significantly, the research finds.
More than 2,000 wealth management clients representing a broad spectrum of segments including wealth level, age, region and gender were surveyed by Oxford Economics for this report. EY also conducted interviews with more than 60 wealth management executives globally to better understand how wealth managers are thinking about and investing in key growth initiatives.
Alex Birkin, EY’s Global Wealth & Asset Management Advisory Leader, says:
“This research should make the industry sit up and take notice. The rules of the game have changed. In order to attain growth, managers must now learn to compete with man, machine and hybrid-based firms to retain and attract new assets.”
Revenue growth is a top priority
With client assets in play, 50% of wealth managers interviewed globally indicated that revenue growth will be the top focus of their strategic business priorities in the next two to three years, especially in Europe and the Americas. Specific revenue growth initiatives will focus on enhancing the client experience.
Bridging the client experience gap
Client experience in wealth management is unique and complex, as it spans an individual’s life journey of managing and preparing for the unknown, the report notes. As a result, wealth managers have lacked a common definition of client experience or a standard against which firms can measure themselves. Yet, the report identifies a common view of client experience, as respondents say they value performance, engagement and trust the most in their wealth managers.
Clients and firms are aligned on most of these values, but there are three areas where firms appear to be out of step with client expectations, the report finds:
- Transparency— Clients are eager for a new level of transparency that includes rating their advisors and connecting with similar clients in public forums.
- Advice channels— Clients are significantly more open than firms to adopting digital channels for wealth advice, not just service.
- Role of the advisor—The financial advisor may become more like a financial therapist in the future, helping clients with spending habits or reaching life goals instead of strictly providing standard asset allocation advice or other activities that could be automated.
Nalika Nanayakkara,EY’s US Wealth Management Leader, says: “In an industry where advances in technology, new types of competition and client expectations are changing rapidly, firms that challenge traditional norms while remaining true to their core value proposition will be better positioned to succeed. Delivering a comprehensive client experience is the linchpin that will make or break a firm in this wealth management landscape.”