Hand of Businessman with pay concept (Image: Thinkstock)

American households are increasingly using subscription-priced services such as Netflix and Amazon to fulfill everyday needs. Within the next five years, they will be doing the same for financial services, according to Ernst & Young’s latest NextWave Consumer Financial Services report.

Charles Schwab announced a subscription-priced premium digital financial advisor service last month and if EY is correct, many more subscription-based services in financial services will follow.

(Related: Why Schwab’s New Pricing Plan Is a Big Deal)

“The overall consumer economy has shifted dramatically away from owning and buying to renting and using. The financial services sector has largely avoided this evolution until now,” according to the report, which is based on a survey of 1,500 U.S. consumers split across wealth, age and other demographic factors as well as interviews with dozens of senior business, digital, product and technology leaders across the banking, wealth management, insurance and technology industries.

Its purpose: to understand the underlying reasons consumer engage financial firms and the strategies of firms competing for clients at a time of transformative technological change.

EY expects that in the next five years the financial services industry will adopt a new subscription-based model that charges an annual fee for a bundle of products and services associated with specific life events such as buying a home, having a child or preparing for college.

“Consumer finance will become the next subscription model, unbundling products and re-bundling personalized and holistic value propositions based on life events,” the report notes.

The dashboard for the model will be an AI-driven personal financial operating system that functions as a “financial well-being platform” using “all available data about consumers’ financial lives, goals, social styles and personal preferences to produce insight and promote daily decisions” to promote behavioral change and improve their financial well-being.

In addition, consumers will also be provided “pre-curated access” to other professional services such as accountants and attorneys and to nonfinancial services such as home improvement services and nursing facilities.

“Subscriptions for wealth managers will be about how to effectively integrate the digital platform and human advisor experience into a single service experience,” says Nikhil Lele, principal and digital transformation leader for the EY Financial Services Organization.

Consumers  “appear willing to pay for the increased value associated with subscription offerings” and those offerings will create value not only for consumers but for financial institutions as well, according to the report.

EY found that “the appeal of subscription-model is more age based than wealth-based” with those in the 25-34 and 35-49 age groups most interested. The survey found that more than half of consumers in those age group were attracted to the model.

It also found that the life events that prompted the most interest in subscription models involved getting married, having a child and starting a first job.

Most important for financial advisors, the study  found that the customers of financial institutions prefer to have subscriptions with their financial providers rather than a technology firm.

Still, “because large technology firms can enter the competitive landscape and capture material market share,” EY recommends that financial institutions act now to reframe their business model as the focus shifts from products and transactions to user experiences and relationships.

“In short, the industry will become the new subscription-based model, and in doing so, we will witness the disintermediation of the financial service from the financial product…. Wait-and-see approaches will be riskier in the next five years, as first-movers stand to gain significant advantage.”