Long-term success for wealth management firms will in part depend on their willingness to explore collaborations and partnerships with FinTech companies, as well as improve their digital maturity finds the 20th annual World Wealth Report (WWR) released by Capgemini.
According to the firm, wealth management firms are missing the mark when it comes to implementing digital capabilities, and as a result, are putting profits, client, and employee retention at significant risk. They note that up to 56 percent of firms’ net income could be at risk due to client attrition due to lacking digital capabilities. The report also finds that more than half of wealth managers (55 percent) are not fully satisfied with their firm’s digital capabilities and consequently, over a third (39 percent) would even consider looking for employment elsewhere.
“As wealth firms and wealth managers face a number of converging market dynamics, including increased competition from FinTechs, firms need to be making progress on all aspects of their digital capabilities to ensure they remain relevant to clients who may be wooed by their technology-driven competitors,” said Anirban Bose, Head of Global Banking and Capital Markets, Capgemini’s Financial Services Business Unit. “The latest World Wealth Report findings reinforce the need for firms to adapt to meet evolving client and manager expectations alike, as nothing less than a high level of digital maturity will be adequate in the face of digitally-native competitor providers.”
Limited digital maturity despite increased HNWI demand and threat from FinTechs
With High Net Worth Individual (HNWI) demand for digital services continuing to increase in areas where FinTechs are strong, such as automated advisory platforms, open investment communities and third party capability plug-ins, wealth management firms cannot afford to fall short in any aspect of their digital strategy. In the past year alone, the report found HNWI demand for automated advisory services has shot up nearly 20 percentage points, from 49 percent in 2015 to 67 percent in 2016. Additionally, 47 percent of HNWIs say they now use peer-to-peer platforms at least weekly to find out about investment ideas.
The correlation between digital maturity and asset acquisition and retention is only expected to increase in the coming years. Seventy-three percent of HNWIs reported that digital maturity is very or somewhat significant in their decision to increase assets with their wealth management firm over the next 24 months, a percentage that increases to 86 percent for HNWIs under 40.
Demand for digital tools runs high but satisfaction among wealth managers runs short
Wealth managers have joined HNWIs in expressing demand for digital tools with richer functionality. This was found to be true across all regions and age groups at 81 percent. Yet while wealth managers showcase high demand for digital, firms for the most part have not fulfilled these requests. Less than half of wealth managers are satisfied with their firm’s digital capabilities, despite citing digital tools as valuable in supporting a number of functions, including increased collaboration with clients (86 percent), the ability to better leverage client data to identify growth opportunities (82 percent), and even time savings through reduced paperwork time (82 percent).
Social media and mobile tools were found to be especially lacking, with wealth managers of all ages saying that view prospecting through social media is an important digital capability they require (60 percent), but it was the area with which they are least likely to be satisfied.
Wealth management firms must become digital leaders to achieve success
As their role evolves, long-term success for wealth management firms will depend on putting wealth managers at the center of digital disruption, and their willingness to explore collaborations and partnerships with FinTech companies. Engaging wealth managers will be important as more than three-quarters (79 percent) of wealth managers say they would like to pilot new digital tools, and more than half (53 percent) have already lobbied their firm to improve digital capabilities. A surprising amount (42 percent) has even invested their own money to purchase off-the-shelf software in an attempt to plug gaps in their firms’ offerings. Several of the world’s largest firms are currently exploring accelerator programs designed to attract startups interested in collaborating. Other firms are investing in or acquiring FinTechs in an attempt to jumpstart their digital capabilities, especially in the areas of automated advice and investment management services.
The report highlights how the most successful firms will be those that take bold steps to overcome resistance to change and embrace a world that increasingly values digital interactions.
You can explore the interactive report website at the following link.
El Informe Mundial de la Riqueza (World Wealth Report) de Capgemini es la fuente de referencia para conocer la evolución de los grandes patrimonios (HNWI), su riqueza y las condiciones mundiales y económicas que impulsan el cambio en el sector de la gestión de patrimonios. Esta vigésima edición incluye las conclusiones de los trabajos de investigación más profusos que existen sobre perspectivas y comportamiento de HNWI. El estudio también incluye la encuesta mundial de perspectivas de los HNWI (Global HNW Insights Survey 2016), realizada entre más de 5.200 individuos con elevado patrimonio en 23 mercados en Norteamérica, Latinoamérica, Europa, Asia-Pacífico, Oriente Medio y África, con el objetivo de analizar los niveles de confianza de los HNWI, las decisiones de asignación de activos, las perspectivas sobre el impacto social, así como el asesoramiento en gestión patrimonial que demandan y preferencias de servicios. Además, la encuesta a gestores de patrimonio (Wealth Manager Survey 2016) realizada entre más de 800 profesionales en 15 mercados en Norteamérica, Latinoamérica, Europa y Asia-Pacífico, para evaluar el papel cambiante del gestor patrimonial.