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Financial Planning > UHNW Client Services

4 Ways Financial Advice Is Changing: EY

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What You Need to Know

  • Wealth managers and private banks will soon see a blending of people with digital technology to enhance the client experience.
  • Holistic advice that crosses traditional and new wealth products and services will be instrumental in aiding clients.
  • A democratization of advice will take place to help clients of all ages, incomes and financial knowledge levels.

Advisors who work with or for wealth managers and private banks may soon see shifts in how they interact with clients and provide their advisory services. Indeed, according to a new paper by Ernst & Young (EY), the blending of people and digital technology will allow them to “deliver wholly personalized advice.”

Changes will go even beyond that as competition intensifies and firms leverage both digitization and M&A to vie for a larger share of client assets.

Further, these firms will cut costs by “exiting non-core markets” and instead restructure and combine services with retail banks, according to the paper’s authors, Jan Bellens, Mike Lee, Valerie Nott and Mark Wightman.

As early as 2030, clients can expect an experience that “will be radically different from today,”  the paper states.

How Things Will Change

Six factors will define these future changes:

  • Continually updated data-powered automated insights that adjust to needs and circumstance.
  • Client-tailored experiences.
  • Holistic advice that crosses traditional and new wealth products and services.
  • High levels of transparency and trust.
  • Stronger, clearer value creation for all stakeholders.
  • Enhanced global participation and accessibility.

The research suggests that wealth and private bank advisors can “build loyalty and revenue by demonstrating clear links between the fees and data that clients provide, and the service and value that they receive in return.”

There are four “strategic themes” that EY states will shape the future of advice:

1. The disruption of current client expectations.

This includes developing “personality portraits” that will help in understanding client needs and better shape models to accommodate them. These must also be adaptable to changes in client investment goals, ethical beliefs and digital appetites, which differ across the board.

For example, financial education and training is easier to do through digital learning, while retirement planning advice is less so. Further, baby boomers might lean more toward self-directed investment than millennials, although the latter are more open to digital adoption.

The paper suggests that firms will begin to use artificial intelligence to “interpret behavior, identify emotional insights and meet the right needs at the right time.”

2. The democratization of advice.

There will be a growing demand for more sophisticated products and services for mass affluent and high-net-worth segments, the paper states.

This includes a move toward direct indexing, private assets, fractional ownership and tokenization that provides tradable access to private markets and physical assets.

For example,  81% of ultra-high-net-worth investors have active funds, while 59% of HNW 50% of the mass affluent do. Only 14% of the mass affluent use alternative investments, compared with 81% of UHNW investors.

While only 14% of mass affluent investors use financial education, that is more than the very high-net-worth group (11%) and just below the UHNW (17%).

Rolling out the more sophisticated products no doubt could “strengthen loyalty and profitability, but it will also pose significant challenges.”

3. Integration of people and technology.

A “majority of wealthy clients” plan to access more advice through digital tools going forward, the authors state. Thus, firms will have to improve technology interfaces and meld them with human advisors.

Getting this blend right means providing “high-value omnichannel advice in real time.” EY believes this will be difficult because it means firms must “incorporate” digital with tech-enabled remote advisors, but this should not only improve advisor performance but also lower the cost of serving each client, the paper states.

4. The use of data and technology in advice generation.

Despite advances made in digitizing advice delivery, there is much to do in improving “advice itself,” the report states.

Asia-Pacific (65%) and millennial (78%) investors believe digital tools have improved decision-making, according to EY. In North America, only 51% believe so and 34% are neutral. Men (59%) are more likely to believe so than women (51%), while the very high-net-worth (68%) and UHNW (66%) believe digital tools have improved their decision-making.

That means many aren’t a part of this transition. Therefore, firms will have to take client data and, with AI, “generate insight-rich advice.”

“Harnessing the power of personal data will be critical,” the report states.

But although clients may be willing to share data, the firm will have to explain how it will be used and how it will benefit the advice and services clients receive.

Firm Imperatives

To make these changes, there are imperatives that firms must put in place.

The first is identifying a model that will be used to deliver better client experiences. To do this, firms will need to:

  • Develop a strategic framework.
  • Build an ecosystem of compatibility and flexibility, or how to interact with partner networks.
  • Set up service architecture for delivery of advice.
  • Identify regulatory requirements and compliance.

The second imperative is to make the investments needed to achieve the desired model. Technology is key here, as is greater diversity in products and experienced talent.

Finally, there must be the right advisor training, close engagement between business units and clear communications from leaders to accomplish these goals.

“Maintaining organizational agility and flexibility is a particularly important priority, and one that is often underappreciated,” the authors conclude.


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