Wealth management clients want flexibility and transparency, finds EY

Research finds rising preference for independent advisors and technology, as well as clear and objective payment methods

Wealth management clients want flexibility and transparency, finds EY

There might have been a time when one large institution could serve as the one-stop financial shop for the average person. But as the needs of wealth-management clients evolve and expand, firms should brace themselves for customers to be less loyal and to seek more flexibility in service and pricing options.

That was a key finding in the EY 2019 Global Wealth Research Report, which is based on a survey of 2,000 wealth management clients across 26 countries, as well as interviews with 50 wealth management executives.

According to the report, 33% of clients have switched providers in the past three years, while another third plan to do so in the next three years. Clients are also maintaining relationships with five different types of providers on average as new entrants and new technologies step in to address customers’ changing expectations.

The research also indicates that the use of independent advisors will rise 18% over the next three years, suggesting that clients find the flexibility in solutions and fees that they offer more attractive. In line with that, 46% of responding clients said they are unhappy with the fees they pay and do not believe they are being charged fairly; among ultra-high-net worth clients, that rises to 66%.

A 55% majority of respondents said they want wealth managers to adopt a payment method that offers more transparency, objectivity, and certainty. While AUM-based fees are the most common in the industry today, the most desired among clients are fixed-fee and hourly support methods.

"Wealth managers realize that clients expect more than just strong investment performance but struggle to communicate the value of their offerings and services,” said Alex Birkin, EY Global Wealth & Asset Management Advisory Leader. “The answer is not simply lowering fees, but rather a combination of increasing transparency and predictability when it comes to pricing models and equipping advisors with ways to communicate value beyond investment returns."

The report also revealed an increasing role of technology in wealth management. The percentage of respondents expecting to use fintech is projected to rise from 38% currently to 45% in the next three years. While the new entrants currently have relatively low AUM, the data suggests that the number of survey participants using fintech is on par with the usage of longstanding wealth institutions.

The number of clients embracing digital channels has risen more sharply than expected. In 2016, only 20% of clients projected that they would prefer to use mobile apps for wealth management activities by 2019, but this year’s research shows 41% of respondents preferring mobile apps as their primary channel for wealth management.

Focusing on emerging technology, the survey found that 1.4% of clients prefer digital and voice-enabled assistants as a primary channel today, with another 9% saying they would prefer the channel in the near future — a number that may underestimate the reality a few years down the line, just as 2016 saw mobile app growth potential being underestimated in 2016.

But in spite of the considerable demand for digital solutions, human interaction still proved to be important. A quarter of respondents said they prefer to engage primarily face to face or through phone calls, and 42% prefer such methods when they receive financial advice.

“As wealth managers prioritize their digital investments across multiple channels, they need to consider how client engagement may evolve in the coming years,” said Nalika Nanayakkara, EY Americas Wealth & Asset Management Advisory Lead. “This may mean reallocating budgets from websites to voice-enabled sooner rather than later, and capitalizing on hybrid models, where clients have access to both digital tools and human interaction.”


Follow WP on Facebook, LinkedIn and Twitter