Wealth management in 2021: A digital shift in the client-adviser relationship

Wealth management in 2021: A digital shift in the client-adviser relationship

Gareth Lewis 21st July 2021 Gareth Lewis, Co-Founder and Chief Executive, Delio

As we reflect on a busy first half of 2021, now is as good a time as any to take stock and reflect on some of the changes we’ve seen in wealth management so far this year. With many of the world’s global financial centres re-opening, travel restrictions beginning to ease, and professionals returning to the office (for at least part of the week), let’s take a closer look at how the wealth management sector has evolved in light of the events of the last 18 months.

In the first of two articles, we explore EY’s recent 2021 Global Wealth Research Report. After more than 18 months of nothing but video calls, email and digital interaction, some parts of the world are now slowly returning to less restrictive rules around travel and social engagement. So, what does this mean for wealth managers and how they interact with their clients? Will we see a return to face-to-face meetings, a permanent move to digital wealth management tools, or a hybrid model?

Has the pandemic changed the client-adviser relationship forever?

The impact of the pandemic on how wealth managers serve their clients cannot be overstated. For years, relationships and trust have been developed by wealth managers through face-to-face engagement and a highly personalised knowledge. During the pandemic this changed almost overnight, as travel restrictions and social distancing materially disrupted this model and meant that wealth managers had to accelerate their digitisation strategies at a pace never experienced before.

While this change in approach was very much forced upon the sector, it now appears that a greater reliance on technology to deliver access to services is what clients expect. Wealth management clients plan on adopting more digitally enabled banking, wealth and investment-related fintech services and the credibility of firms’ digital offering is now seen as one of the core requirements that clients will evaluate when selecting their wealth manager. In fact, 53% of clients reported that they would be willing to pay more for ‘experience-related features’ – these include access to better, exclusive and more reliable digital wealth management tools. 

It could be suggested there has been five years of digital progress made by financial institutions in the last 18 months. Prior to the Covid pandemic, wealth managers had demonstrated a growing acceptance that technology would be important to their longer term strategies. However, the rapid change to how we engage and communicate with one another has shifted the digital adoption conversation from being ‘on the to do list’ to a highly time-sensitive necessity. Perhaps for the first time, wealth management firms now see technology as an essential part of their commercial, operational and regulatory planning.

The enforced, and somewhat reactive, acceleration of wealth managers’ digitisation strategies over the last 18 months does appear to have led to a permanent change in the behaviour of firms and investors. Globally, 51% of clients plan to make even greater use of digital tools in the future and the figures are higher among millennials (78%) as well as clients in Latin America (74%) and Asia-Pacific (64%). One in two wealth clients also plan to engage more with their advisor virtually moving forward. The age of the client is a key differentiator here; millennials are twice as keen as baby boomers to receive advice virtually. Growing adoption is even making its mark on advisor-led wealth models. No fewer than 37% of clients who prefer advisor-led relationships plan to use more digital tools in the future.

Challenging the view that digital wealth management tools = less personalised service

These results appear to combine client expectations of less face-to-face adviser interaction with concerns about a reduction in personalised services. As a result, wealth managers should have a clear view of how important a role high quality digital experiences will play in their service delivery model in the coming years and beyond; simply digitising existing processes will not be enough (although it is a good starting point). While many traditionalists may equate greater technological adoption with less personalised service, digital tools should enable the efficient generation of valuable, data-driven insights. This information can then be used to customise the services on offer to clients based on behavioural characteristics, risk appetite and regulatory profile, amongst other criteria.

I think one of the most interesting elements of digitisation is the changing perception of how technology supplements traditional relationship management. For many years, I’ve heard firms talk about how digital tools were a threat to the ‘personalised service’ that they offered their clients. An enforced change in approach has demonstrated that delivering their services through technology doesn’t necessarily need to mean that their clients receive a sub-standard offering. In fact, if implemented correctly, digitisation can actually enable them to deliver an even more compelling combination of tailored, accessible and highly targeted services.

It is important to note that while wealth management clients are evidently now placing greater significance on the use of digital channels to access wealth management services, face-to-face advice still has a prominent role to play. According to the EY report there is a fairly even divide in preferences amongst clients, with 35% preferring advisor-led engagement, 28% favouring a digital-led model and 37% seeking an equal mix of both. Interestingly, face-to-face advice was still seen as the clear preference when dealing with key life events, such as reaching retirement or making a career change.

At Delio, our view is fairly simple. Technology cannot completely replace the value of traditional advice, and traditional advice can be significantly enhanced through additional value created by technology. Firms shouldn’t approach their digitisation strategy in a binary fashion; wealth management clients, particularly the ultra wealthy, will always want a relationship with their adviser. However, we believe that the integration of digital tools will help firms to deliver more targeted services in a more efficient way, while adding value that will ultimately benefit them and their clients in the long-term.

Are you looking to digitise your private markets operation? To find out more, contact the Delio team today.

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