Why the wealth management sector is ripe for disruption

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Email is one of the few (and sometimes only) digital assets wealth management businesses are offering their high net worth clients, leaving the industry exposed to disruption from fintech startups, a report from PwC has found.

PwC interviewed wealth relationship managers, CEOs and fintech innovators, and drew on insights from 1,000 high net worth individuals (HNWI) in Europe, North America and Asia. It found only a quarter of wealth managers offer digital channels beyond email, contradicting the expectations of their clients.

This is most evident in the Asia Pacific region where 62% of HNWI in APAC want their wealth manager to have a strong digital offering, compared to the global average of 55%.

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Globally, more than 40% of respondents go online to review their portfolios or the markets. More than one in three are already using online services for portfolio management. Across APAC 77% of HNWIs already use online/mobile banking, compared to the global average of 69%.

The report notes: “Players in the wealth management sector seem oblivious to their technology shortcomings: some firms rate themselves as digitally sophisticated, when the only service offered to clients is a website.”

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Antoinette Hoon, private banking advisory services partner at PwC Hong Kong, says ignoring this state of affairs is not an option. “If firms do not respond now, they simply will not survive in the medium to long term,” she says.

PwC advises wealth management firms to:

  • Accelerate efforts to adopt a comprehensive digital infrastructure that integrates every aspect of their activities and corporate culture, from the back office to how they service clients and market to new prospects
  • Harness the potential of digital to realize greater efficiencies, manage costs and advance their core client proposition by drawing on a much wider range of available data
  • Be willing to partner strategically with fintech innovators to deliver technological solutions at the speed the market expects

Other findings include:

Globally, two-thirds of wealth relationship managers do not consider robo-advisors a threat to their business and believe their clients do not want digital functionality. However, the PwC survey finds 77% of clients in the APAC region rank ‘investment performance’ as most important versus globally, 62%. ‘Rapport with advisor’ is valued much less across APAC at 41% (compared to 50% globally).

“With a client-base that feels only weak affiliation to its chosen providers, the sector is now acutely vulnerable to digital innovation from fintech incomers, including robo-advice services, which may be able to offer a broader range of products and services,” says Hoon.

PwC’s Hong Kong office has seen a number of local wealth management players begin to make better use of technology and analytics to increase client experience and account penetration. However, it finds much of the broader industry remains in its infancy in the adoption of digital technology.

“In an increasingly complex world where the investment office may, for example, have to evaluate more than 200 different investment products for a client, and where clients are also aware of what automated technology can do in the investment advisory space, technology will be vital to keep the job both do-able and scalable for a growing audience,” says Hoon.

“HNWIs in Asia Pacific are more at ease with technology as compared to their global counterparts. Firms that embrace and seize the digital opportunity now are in a powerful position to deliver propositions of real and sustainable future value which combine the very best of technological and human capital,” she says.

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