Wealth management behind in adopting digital technology: PwC

PwC’s report, “Sink or Swim: Why Wealth Management Can’t Afford to Miss the Digital Wave”, draws on interviews with wealth relationship managers, chief executives and financial-technology innovators. It includes insights from a survey of 1,000 HNWIs in Europe, North America and Asia. 

The report says only a quarter of wealth managers offer digital channels beyond e-mail. 

This is despite the fact that 69 per cent of HNWIs globally and 77 per cent in the Asia-Pacific region use online and mobile banking. More than 40 per cent go online to review their portfolio or investment markets. More than one-third globally use online services for portfolio management.

Vilaiporn Taweelappontong, partner for PwC Consulting (Thailand), said CEOs of traditional wealth-management firms needed to accelerate their efforts to integrate technology into their business. 

“Wealth management is one of the sectors most vulnerable to digital disruption today,” she said.

“Wealth managers currently rank among the slowest adopters of digital technology in the global financial-services industry. This tells us that the sector remains focused on a conventional way of servicing clients and that major changes need to take place.”

Demand among HNWIs for finance-related technology is similar for both younger and older HNWIs. The exception is portfolio management, where under-45s are more interested in managing investments online. 

More than half of HNWIs surveyed globally (55 per cent) and nearly two-thirds in the Asia-Pacific region (62 per cent) believe it is important for their financial adviser or wealth manager to have a strong digital offering. For those under 45 and in Asia, the number rises to 64 per cent. 

HNWIs are increasingly aware of automated technology in the investment advisory space. More than a third of HNWIs in the Asia-Pacific region who do not currently use robo services that cut out the middleman would consider using them in the future. 

 

Overestimating digital capability 

Even so, players in the wealth-management sector seem to be oblivious to their technology inadequacies. Some rate themselves as digitally sophisticated, when the only service offer to clients is a website. 

Two-thirds of wealth relationship managers globally do not consider robo-advisers a threat to their business. Moreover, they say their clients do not want digital functionality.

Only 34 per cent of HNWIs in the Asia-Pacific region are likely to recommend their current wealth manager to others. This falls to 23 per cent among US$10-million-plus (more than Bt348 million) clients worldwide. 

Vilaiporn said the industry was acutely vulnerable to digital innovation from fintech incomers who can offer wealthy clients slick and highly personalised ways to manage their assets, and leverage real-time data continuously to make better financial decisions. 

PwC’s report finds that “investment performance” and “range of products and services” are the most important aspects for all clients.

However, “rapport with adviser” is much less valued, at 41 per cent in the Asia-Pacific region versus 50 per cent globally. Some 77 per cent of clients in the region rank “investment performance” as the most important, against a global figure of 62 per cent.

In PwC’s view, to survive, wealth-management firms must 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 new prospects. 

They should also harness the potential of digital to realise greater efficiencies, manage costs and advance their core client proposition by drawing on a much wider range of available data. They should be willing to partner strategically with fintech innovators to deliver technological solutions at the speed the market expects.

As for Thailand, Vilaiporn said some wealth-management players had started to make progress over the past few years into better use of technology and analytics to enhance the client experience. 

Even so, the broader industry largely remains in its infancy in adopting digital technologies. If wealth managers miss this growing trend, they risk losing market share.