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Practice Management > Building Your Business

U.S. Wealth Managers Holding Their Own in COVID Crisis: Aite

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U.S. wealth management firms may be glad to know that their industry, unlike the country, has outperformed their counterparts in Europe and Asia during the first few months of the COVID-19 pandemic.

A new Aite analysis of 31 wealth management practitioners on all three continents — 12 in North America (including 11 in the U.S.), 10 in Europe and 9 in Asia — found that no U.S. firm experienced a negative impact on business performance as a result of staff working remotely, which was not the case for European or Asian firms.

North American firms were better prepared for a remote working environment because they had invested more heavily in technology with a focus on digitization, and their clients were generally comfortable working with their advisors remotely.

Wally Okby, one of the authors of the report, told ThinkAdvisor that U.S. firms got a head start on digital operations after 9/11, when many Wall Street firms were forced to resume operations in locations away from downtown New York, including many employees’ homes.

Clients Demand More Digital Engagement

More than half (53%) of wealth management firms that took the survey reported that clients were demanding a major increase in digital engagement. 

“This is a remarkable shift given the wealth management industry’s traditional advisor-led business model and that management firms have been complaining for years that their clients show low adoption of digital tools,” according to the report, whose writers also include Alois Pirker and Dennis Gallant. The survey was conducted in April and May. 

With clients no longer an obstacle to digital engagement, “the race is on for wealth management firms to not only meet the minimum clients requirements but to also delight clients with an outstanding digital experience,” according to Aite. “The future is far more digital and far less physical.”

Sixty-eight percent of the firms surveyed said that communications with clients increased in recent months compared to a year ago, and another 19% reported a marginal increase.

Video conferencing has become a key part of that engagement, a “saving grace” that works well to support current clients but is only a “temporary workaround” for prospecting for new ones, according to Aite. Forty-one percent of global wealth management firms surveyed were either not satisfied or only partially with the ability of advisors to prospect for new clients during the pandemic.

Discretionary Portfolio Management Expands

On a more positive note, roughly half the global firms surveyed reported an increase in the volume of new discretionary portfolio management business, and about 40% saw an increase in net flows to existing discretionary portfolio accounts and in financial plan setups.

Sixty percent of firms reported a major or marginal increase of net flows into cash accounts and only 10% of firms experienced a drop in such net flows — all outside North America. Thirty-three percent experienced major increase in retail trading, but the percentage was higher — about 50% — in North America and Asia. 

Looking ahead, Aite expects firms will work to improve their digital client engagement platforms as well as their CRM capabilities, financial planning tools and digital content delivery. Sixty percent or more of firms surveyed saw a need to do all.

“Firms are well advised to move forward with technology initiatives as time is of the essence and leading firms will not sit idle,” the report concludes, noting that budget constraints should not constrain such moves.

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