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Industry Spotlight > Women in Wealth

Wealthy Clients Demand More Digital Services From Advisors

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Nearly two-thirds of high-net-worth individuals globally expect their wealth management relationship to be mainly or entirely digital in the future, according to a report from Capgemini, a consultancy, and Salesforce, a major CRM provider.

The wealth management industry, however, lags other industries in financial services such as insurance and retail banking, and clients expect them to catch up, the report said.

The report said future digital demand comes from both those with relatively modest wealth, $1 million to $5 million, and those with more than $20 million in investable assets, and is especially true for high-net-worth people under age 40.

According to Capgemini research, face-to-face interactions continue to be important to clients, but this preference will fade as the new generation of clients comes to the fore.

This is already happening. Many wealthy individuals strongly prefer digital channels over direct ones to execute transactions and transfer funds between accounts.

The same holds true for receiving information, where the biggest preference is for using websites rather than direct contact to download research and education, access news and content, search for products, services and investments, and evaluate portfolio information and performance.

Direct contact still holds sway — though barely — when it comes to obtaining advice and service from wealth managers; engaging with several experts at the same time, for example, in a financial planning discussion; and conducting general communications with the wealth manager, including document exchange and portfolio reviews.

Time to Catch Up

What are the risks for wealth managers of not getting digital right?

On the client side, significant attrition. Sixty-six percent of high-net-worth individuals globally surveyed in the first quarter would be inclined to leave a wealth manager because of lack of integration across personal, phone and digital channels, including 87% of Latin Americans, 63% of Europeans and 56% of North Americans.

Likewise, two-thirds of respondents across all wealth bands and age groups expressed a propensity to leave, including 80% of people under age 40.

Capgemini projected that, in a worst-case scenario, client departures would cost wealth managers and firms a whopping 56% of their net income. It softened this by saying attrition would play out over time — and very few firms would fail to take some action.

Besides client attrition, firms are also at risk of losing wealth managers.

A year ago, some 50% of wealth managers told Capgemini researchers they would leave their firm in the short term, and related findings showed that two-thirds of high-net-worth clients would be likely to follow their wealth managers to the new employer.

How can firms arrest these defections? The report said one way was to focus on wealth managers’ emerging digital demand.

Only slightly more than half of managers purported to be at least somewhat satisfied with their digital capabilities, such as real-time access to client profiles, market information and advisor desktops with all applications on a single platform.

Only 24% said they were satisfied or extremely so, “implying very significant correlation between digital capability and wealth manager attrition risk,” according to the report.

Capgemini’s research showed that wealth managers who were likely to leave their firms in the next six to 12 months were 19 percentage points less digitally satisfied than those who were unlikely to leave their firms.

— Check out Salesforce Releases Cloud CRM for Wealth Managers on ThinkAdvisor.