When it comes to working with robo-advisors and other forms of automation, it’s time for financial advisors to act.
The first survey led by consultancy firm PwC found that 60% of asset and wealth managers worldwide fear losing part of their business to fintech companies. Yet only 45% have put fintech at the center of a digital strategy.
In comparison, 90% of banks surveyed have or will soon have a fintech approach in place, generally emphasizing mobile applications.
“There are a lot of issues here,” said Michael Spellacy, head of global wealth management for PwC, in an interview with ThinkAdvisor. “At the heart of it is the issue of what the future of advice is, along with the role of trust and the balance between human capital/advisors and robo-advisors/technology.”
And while it’s not surprising that wealth managers have a contradictory approach to the challenge—fearing, but not acting in response to, digitization—they need to recognize how important it is to embrace technology for the sake of their clients and, by extension, their practices, Spellacy pointed out.
“Wealth managers are stewards of very sacred information for clients—namely their financial and long-term goals,” he said, including legacy plans and retirement. “Today, you have to be able to engage clients with technology and have them experience [wealth-related] technology, as they are doing so in all aspects of their lives.”
As real-world advisors fail to move forward quickly and aggressively, robo-advisors are quickly picking up the slack.
In just two years, for instance, Charles Schwab’s Intelligent Portfolios have amassed over 75,000 clients and $8.2 billion in assets, topping stand-alone robo firms Betterment and Wealthfront, which had $4 billion and $3 billion in client assets, respectively, earlier this year.
“Conversely, turning a blind eye to shifting market expectations and ignoring the quick and imminent rise of innovative products, services and business models can be dangerous. Those who cling to business as usual, focusing on manual operations, pure investment management and siloed client data, should expect their market share to diminish at an increasing pace,” the report stressed.
As Spellacy sees it, many asset and wealth managers are being “highly complacent” and are confining their work to basic investments in automation, rather than “looking holistically at technology and what can happen across the client experience and [the firm’s] value chain with innovation.”
In other words, wealth firms should act soon and adopt technology-focused strategies and solutions that can strengthen their market positions.
“Collaboration with fintechs is crucial and will be the only way for the traditional firms to deliver technological solutions at the speed expected by the market,” according to the report. “New entrants create tangible opportunities for incumbents to improve their traditional offerings. Going forward, traditional players need to prioritize these types of investments.”
At least one firm appears to have gotten this message: UBS Americas, which invested in and formed a partnership with SigFig earlier this year.
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