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How Can Wealth Managers Impress “Early Adopters”?

Wealth Management

By Greg King, CFA  |  May 25, 2021

A growing number of tech-savvy investors, dubbed Early Adopters[1] , are using online tools and insight to complete their end-to-end investment management activities virtually.

A common misconception about Early Adopters is that they tend to be digital natives or “difficult-to-please” Millennials (under-35s). However, since our 2018 study, Winning Clients in the Era of Hybrid Advice, the average age of an Early Adopter has increased from 37 to 45. Although they are comfortable with conducting approximately two-thirds of their wealth management activities online, 78% say they do so while navigating a range of digital pain points.

Technology offers investors a degree of control and transparency, particularly in a volatile environment, enabling clients to make more informed decisions. The steep post-pandemic rate of technology adoption, however, has revealed a growing digital divide between what Early Adopters need and what wealth management firms can deliver. To continue to offer a superior digital experience to its clients, wealth managers must urgently review and reconcile gaps in their offerings.

Advent of a Digital Investor

Our latest study, in collaboration with Aon, finds that Early Adopters tend to be more “sophisticated” investors who, in constructing portfolios, weigh up a broad range of investment considerations.

Since the start of the pandemic, the majority of Early Adopters have altered their investment approach to adjust to the volatile economic environment. For example, 46% of Early Adopters are adopting a longer-term investment horizon and over half have shifted the focus of their portfolio to growth (52% vs. 10% of Digital Phobics).

As a result, the composition of their portfolio is also changing. Although liquid assets remain the dominant preference for portfolio construction, there is a tendency among Early Adopters to prefer illiquid assets (30% vs. 4% for Digital Phobics) due to an extended investment horizon.

Technology offers Early Adopters greater access to information and therefore may be the reason why a greater proportion of high net worth individuals say they feel very confident about their financial futures (44% vs 30%). It may also explain why they are more likely to say they have adventurous attitudes to the growth of capital strategies than their less digitally savvy counterparts.

Due to Early Adopters’ unique perspectives, their outlook differs from other investors. For example, they are much more likely to see international stimulus (51% vs. 33%) and changes in political leadership (40% vs. 17%) as opportunities rather than threats to wealth creation. They are also approximately twice as likely as Digital Phobics to say it is very important to continue investing in emerging industries and companies that have strong ethics, while simultaneously taking advantage of any market volatility [Figure 1].

Investors Are Looking for Their Edge

On the other hand, low or negative interest rates are perceived as a risk, which is perhaps why over two in five Early Adopters say they are avoiding companies with high levels of corporate debt (46% vs 44%).

Growing Pains

Reliable technology is critical to Early Adopters—if they are to continue making the most of opportunities in a rapidly changing investment landscape.

However, they are least likely to be impressed by the digital experience from their wealth providers, with data showing that just 22% say there are no pain points to managing their wealth online. Indeed, only 34% of Early Adopters give their wealth manager’s digital capabilities top scores.

Some issues are easier to solve than others. One of the common challenges is that insights delivered by their wealth managers are not sufficiently tailored to their interests. Another is that investment information is not timely, easy to understand, or analyze.

For example, frequently cited pain points by Early Adopters include challenges around understanding portfolio performance (20% vs. 7% for Digital Phobics), knowing what are the next steps for their portfolio (22% vs. 4%), difficulties with reaching their advisor (17% vs. 4%), and the inability to see real-time data (19% vs. 7%).

It will therefore be up to each wealth manager to decide how best to prioritize investment in improving access to real-time insight, portal functionality, and the overall user experience.

Figure 2: Digital Investor Profiles for a Post-Pandemic World

ID18202 Digital Investor Profiles for a Post-Pandemic World_v22_NEW

 

The New Dawn

Today, clients’ expectations around the digital experience are vastly different from only a few years ago—and continue to advance at an incredible speed.

Early Adopters are the first to trial new technology and are, to an extent, self-servicing (as they intend to conduct the majority of their interactions digitally in the future). Therefore it’s important for wealth managers to meet their discerning standards and uphold their trust.

A range of innovation opportunities exists for wealth managers wanting to impress their Early Adopter clients. For example, when thinking about missing elements in their wealth relationship, they are six times more likely to value ease of customization (36% vs. 6%), and nine times more likely to seek interactive insights (36% vs. 4%) and access to specialists (34% vs. 4%), than other clients.

A key benefit of completing more wealth management activities online also includes clearer visibility of the products and countries in which they are invested (26% vs. 14%). Such tools are an important value add for investors, as they provide much-needed regional oversight and enable Early Adopters to closely monitor the changing landscape.

These sets of priorities differ from other segments, which are less digitally and financially confident, and more defensive in their investment approach. Wealth managers should therefore seek to address these gaps.

Conclusion

Today, most wealth managers have digital propositions that help clients better engage with their wealth. However, the digital divide precipitated by the pandemic between firms that have embarked on a journey of digital transformation and those who have been slow off the mark is growing—and is a particular issue for Early Adopters.

While Early Adopters are open to using technology to manage their wealth, they are unlikely to continue if their digital experience remains riddled with issues.

To impress Early Adopters, wealth managers have a range of options open to them. Some are quick wins like improving the timeliness of data; others are more complex like advancing customization and access to specialists. Both are worth the investment as innovative tools make firms more attractive not only to Early Adopters but also to other client segments.

[1] Early Adopters self-identify as being the first to trial and use new technology in wealth management.

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Greg King, CFA

Senior VP, Senior Director, Wealth Management and Digital Solutions Strategy and Product Development

Mr. Greg King is Senior Director, Wealth Management and Digital Solutions Strategy and Product Development at FactSet. In this role, he focuses on the allocation of resources for all areas of the Wealth Management business; from market research and product development to implementation of a parallel sales and marketing plan. Mr. King moved to London from the U.S. in 1999. Prior to leading FactSet’s Wealth Management Strategy, he spent eight years as Director of Workstation Solutions for the EMEA and APAC regions, and before that, was Vice President, Institutional Sales in FactSet's UK Investment Management region. Mr. King earned a degree in Economics from Boston College and is a CFA charterholder.

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