EY research challenges : Why 33% of wealth management clients plan to switch providers

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The FINANCIAL — An increasing number of wealth management clients are willing to pay for financial advice, but what they value is evolving rapidly, as 33% of clients have switched providers in the past three years, and another third plan to do so in the next three years, according to the EY 2019 Global Wealth Research report, which is based on a detailed survey of 2,000 wealth management clients in 26 countries and speaking with 50 different wealth management executives.

With no sole provider able to solve respondents’ varied needs, wealth management clients are maintaining relationships with an average of five different types of providers. And as the industry grapples with new entrants, new technologies and changing client expectations, wealth managers must take a step back to evaluate their offerings and redefine how they provide financial advice to better meet client needs and expectations.

Research says more than 80% of wealth management clients express interest in financial advice and planning, yet half of these remain on the sidelines.

 Use of independent advisors and FinTechs expected to rise


According to the research, the use of independent advisors is expected to rise 18% over the next three years, suggesting the flexibility in the solutions and fees being offered is more attractive to clients.

Similarly, the percentage of respondents expecting to use FinTechs will increase from 38% today to 45% in the next three years. Although these new entrants have relatively low assets under management (AUM), the research suggests that the number of respondents using FinTechs is on par with usage of long-established wealth institutions.

Respondents are moving to smaller, more nimble providers – specifically FinTechs and independent advisors – for more tailored solutions that meet their evolving needs. The research indicates that traditional wealth managers should take note and try to better understand and deliver on what matters most to their clients, such as anticipating their major life events and proactively adjusting accordingly.


Emerging technology preferences exceed 2016 projections


Digital channels are also evolving faster than wealth managers and their clients anticipated three years ago. In 2016, only 20% of clients projected that they would prefer to use mobile apps for wealth management activities by 2019; whereas this year’s research shows 41% of respondents preferring mobile apps as their primary channel for wealth management.

When it comes to emerging technology, 1.4% of respondents prefer digital and voice-enabled assistants as a primary channel today. However, 9% say they would prefer this channel in the near future. This trajectory indicates a considerable swing in momentum – but these numbers may be significantly underestimating growth potential, just as mobile app growth potential was underestimated in 2016.

Despite rapid demand for digital solutions, respondents still desire human interaction as 25% of respondents prefer face-to-face or phone calls as their primary method of engagement, and almost half (42%) prefer these methods when receiving financial advice.


Nalika Nanayakkara, EY Americas Wealth & Asset Management Advisory Lead, says:

“As wealth managers prioritize their digital investments across multiple channels, they need to consider how client engagement may evolve in the coming years. 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.”


Clients demand alternative pricing models


Nearly half of wealth management client respondents (46%) are unhappy with the fees they pay and do not trust they are being charged fairly, with dissatisfaction particularly high (66%) among ultra-high net worth clients.

Most respondents (55%) want their wealth managers to use a payment method that offers more transparency, objectivity and certainty. Percentage of AUM is currently the most common payment method; however, fixed fee and hourly support methods are most desired.


Alex Birkin, EY Global Wealth & Asset Management Advisory Leader, says:

“Wealth managers realize that clients expect more than just strong investment performance but struggle to communicate the value of their offerings and services. 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.”


Half of respondents hold back from engaging in advice and planning


Wealth managers are overlooking the value in offering robust advice, planning and budgeting services. More than 80% of their clients express interest in advice and planning services, but fewer than 40% utilize them currently. Additionally, just 28% of respondents discuss saving with their wealth manager, even though this is a critical opportunity for providers to engage in conversations about their daily budgeting. 

Birkin says: “Beyond the everyday and specific targets, clients aspire to reach a level of independence where their money empowers them, whether it helps to remove worry or achieve a greater purpose. Wealth managers must redefine the value of financial advice by focusing on the intangibles – those solutions with less measurable or quantifiable benefits, but which improve their clients’ day-to-day lives.”


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