Wealth managers at risk of losing richest clients to digital providers

According to PwC, technology has lifted a veil on performance and wealth managers are at risk of losing even their richest clients to digital advice providers. A recent report by the consultancy firm revealed a huge disconnect between advisers and their high net-worth (HNW) clients when it comes to the use of technology, with 70% of HNW clients using digital tools while 25% of wealth managers have no digital connection to clients other than email. The report states that HNW and ultrahigh net-worth individuals are increasingly open to transferring at least some of their assets digitally, and although they are expected to continue to have a great relationships for advice, they will demand digitally capable offerings and ways of interacting with relationship managers. A study found 39% of clients surveyed would recommend their current wealth manager, but the percentage dropped to 23% for clients with $10m or more in assets. Michael Spellacy, the report's author, said wealth management is the least tech literate of all financial services, despite claims from wealth management firms that they are adapting to digital advice trends. 

Repeatedly, wealth management leaders say their firms are adding new technology and adapting to digital advice trends. But one major consultancy says its research has found that's not the case.

"Essentially, wealth management as a sector is the least tech literate of all financial services," says Michael Spellacy, global wealth management leader at PricewaterhouseCoopers.

According to a new PwC report on technology and wealth management, Spellacy says that there is a huge disconnect between the use of technology by advisors and their high-net-worth clients.

Among the report's findings: 70% of HNW clients quizzed by the study were using online and mobile capabilities, whereas 25% of wealth managers have no digital contact with their clients beyond email.

"We see the HNW segment -- and even the ultrahigh net-worth individual -- increasingly adopting technology and being much more open to transferring at least a portion of their assets digitally," Spellacy says. "They will continue to have great relationship advice, but they also need to have digitally capable offerings, and a digitally capable way of interacting with their relationship manager."

CLIENT LOSS RISK?

The industry-held belief that the wealthy will eschew robo advice is an "obfuscation," according to Spellacy, who pointed out that according to PwC's study, 47% of HNW clients under 45 not using robos would consider them in the future.

"There's no doubt about the usage of technology at all levels of clients," Spellacy says, "and the veil has been lifted on performance. Everybody can now see what they are getting for what they pay for. And they know they can get as good if not better from a much cheaper portfolio than what you can get from an advisor."

Could wealth managers lose even their richest clients to digital advice providers?

Spellacy says there is a risk, as PwC found that only 39% of clients they surveyed would recommend their current wealth manager, a figure that dipped to 23% among clients with over $10 million in assets.

He chalked up the low numbers to lackluster engagement. The solution, he added, is for wealth managers of all practices to fully embrace digital means of connecting and serving their clients.

"It means bringing together the best of human capabilities and technology to deliver advice holistically across client needs," he says. "They have a complex set of emotional, financial and family goals, and the opportunity is there to use technology to bring a full set of capabilities to bear that a robo cannot."