A ‘Sharing’ New Generation of Investors Is Ripe for Closer Wealth Management Relationships

The new generation of wealthy investors likes to share. They are more significantly more comfortable communicating their opinions and sharing personal data online than the wealth management industry realizes, our latest study suggests. Used strategically, this highly personalized content from social media sources can give firms the ability to supply clients with the tools and insights needed for a better digital and wealth management experience, boosting firms’ competitiveness and advisors’ efficiency.

Although data security remains an important issue, the evolution in client behavior suggests investors are open to further expanding their digital relationships, our research concluded. They are willing to share sensitive information about their personal lives in exchange for service improvements in three specific areas: information delivery, the client experience, and the wealth management proposition.  

Know Your (Virtual) Client

In today’s Information Age, there is a delicate balance between personalization and privacy. The conflict between the two often leaves firms struggling to understand what kind of information may be too private to request, how to seek personal information, and how to obtain consent to track it.

Although the sharing of information online is now hardwired into people’s everyday behavior and economic activities, the perception of the wealth management industry has lagged behind. Many firms continue to believe most of their key clients in the Generation X segment are less digitally savvy and therefore satisfied with the occasional in-person meeting and annual performance reports. The industry also argues that, given the sensitivity of wealth management discussions, clients will only be comfortable handing over data to trusted advisors in person.

However, we have identified a willingness among clients — irrespective of age — to open new communication channels with advisors if these help create a more personalized service.

The openness of investors to information sharing is underpinned by their belief that firms will keep their data safe and secure, with more than half of investors (52%) saying they were confident it would be protected. However, ‘digital phobics’ — those who typically avoid using technology for wealth management purposes — have far less confidence in brands’ data storage and security capabilities, with only 5% of this category saying they trusted companies to keep their information safe. Advisors must therefore be prepared to clearly explain to clients how their data will be managed and protected, and in what circumstances it might become available to other organizations.

This is especially true in today’s climate. Client interest in how personal data is used has intensified since the introduction of the General Data Protection Regulation in 2018 and recent well-publicized scandals over data misuse by social media companies. 

Social Media Offers a Wealth of Valuable Data

Personalization also offers strategic benefits for wealth managers through access to clients’ social profiles. The more clients engage online, the more information and data points are available to wealth managers, and the more feedback advisors can offer investors.

Insight from investors’ Facebook, Amazon, or LinkedIn profiles can reveal additional information, such as their purchasing history or online group memberships. Getting to know clients through their online social profiles allows advisors to understand investors beyond typical demographic, life goals, and risk attitude questions, which in turn could help advisors better understand clients’ interests and behavior and generate investment recommendations more aligned to personal preferences. Fortunately, clients are more willing to invite wealth advisors to view their personal preferences than the industry realizes. In fact, almost 60% of all investors are willing to share either some or all of their online profiles with their wealth manager.

None of this insight is in itself revolutionary — after all, single sign-on options through social network accounts have been around for a while. Nevertheless, it is a novel concept for wealth management. In exchange for sharing personal information, investors hope to see a range of improvements to their wealth management relationships, including advisors having a better understanding of their risk profile, sharing information better aligned with their goals, and developing a more suitable financial plan.

Creating a Tailor-Made Client Experience

Personalization is not just about information. It extends to the online landscape, where many high net worth clients believe new technology can encourage greater engagement with their wealth firm. In other industries, it is now normal practice to customize a client’s online experience based on an understanding of their priorities and past behavior. Wealth firms would benefit from integrating similar tools into their websites and investor portals to deliver a best-in-class client experience, which may be different for each investor. Through improved online tracking and analysis, wealth managers will be able to better understand their clients’ online behavior and tailor each investor journey from the moment they log in.

When investors were asked to prioritize a series of technology investments, the top three relate to user experience: having access to dashboards that display key information on wealth, allowing clients to see recommendations based on what other investors with similar preferences have chosen, and addressing communication preferences.

Behind these suggestions lie important nuances in what investors expect from a personalized client experience, driven by their digital preferences. The most forward-thinking firms should redesign the client experience, focusing on delighting investors at the touchpoints that are most important to them individually. An outstanding online experience will offer investors different pathways depending on how comfortable they are with technology.

Online Engagement Brings Better Knowledge and Solutions

As technological advances increasingly become part and parcel of investors’ lives, wealth advisors should seek to become more comfortable using digital tools and suggesting that clients engage with them through new channels. With segmentation that goes beyond traditional demographics and risk profiles, and given sophisticated data capture capabilities, advisors can expand their understanding of a client’s context and online behavior to deliver more targeted and suitable content.

Ultimately, access to additional information from a wider range of sources will allow wealth managers to develop more holistic views of their clients, making the value proposition, online experience, and information delivery more relevant to each individual investor. And as debates around data privacy continue, advisors should remain keenly aware that it is better to engage with investors’ concerns and show how they can be addressed than to miss out on the benefits new data sources offer to both parties in a wealth management relationship.