Warning: No room for complacency on digital disruption

Fund managers and financial advice firms that think they can rely on clients’ desire for human interaction to insulate them from digital disruption may be in for a shock, a new report says.

Thursday, May 19th 2016, 6:00AM

by Susan Edmunds

The report from PwC says the wealth management sector is one of the least technology-literate parts of financial services and is lagging banks when it comes to adopting technology to serve its customers.

“Ignoring this state of affairs is not an option,” the report said. “Firms can only survive if they adopt a comprehensive digital infrastructure and harness the potential of digital to realise greater efficiencies, manage costs and advance their client proposition.”

It said almost half the high-net-worth individuals globally who did not use roboadvice services would consider doing so in future.

Technological developments were creating the possibility of more of the wealth manager's role being handed over to technology, opening the sector up to new players with new ways of doing things.

"Wealth management firms cannot assume that length of experience, brand prestige or even the quality of their client relationships will insulate them from this possibility."

The report found 83% of business leaders globally thought they were at risk of losing business to fintech companies. Wealth management was one of the most vulnerable parts of the industry.

“It is no longer tenable for the wealth management industry to suggest that their client base does not need or want digital functionality in the management of their assets. Digital and mobile services are now as normal and expected in HNWIs’ lives as cars and phones. Firms that do not acknowledge this are now putting their business at risk.”

Clients who had the closest personal relationships with their advisers were least likely to be keen to shift to roboadvice.

But younger clients were a prime target, as were people still building up their wealth, the report said.

It recommended firms take action now to develop digital offerings that maximised their human touch but extended their service to clients.

They could start by addressing their digital transaction capabilities, particularly the online interface for clients.

“Over 40% of HNWIs in all age groups and markets are already using self-directed and execution-only investment services for at least some of their investable assets, while an equal proportion are using online tools that allow them to review portfolios and markets. This being the case, wealth managers need to introduce online servicing as standard, or risk losing share of client assets.”

Clients would soon demand video conferencing, online education content and instant asset information online. If managers could implement those services at the same time as they handed more of their administrative functions over to technology, it would help drive efficiency, the report said.

Over time the wealth managers could move to a position of more automation, although many clients would still want to pay for a personal relationship with a client.

In time they could use their position as trusted custodians of personal data to provide greater service, including life goal facilitation and offering an overview of total assets and liabilities.

Tags: roboadvice