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How Wealth Managers Can Define Their Digital Future

Data Science and Technology

By Philipp Zerhusen  |  November 7, 2018

In March 2018, FactSet and Scorpio Partnership conducted a global online poll of 877 investors with an average net worth of $4.88 million. Respondents hailed from the U.S., the UK, Singapore, and Switzerland, and answered questions concerning the digital transformation of the wealth management industry.

In the world of wealth management, the shift to digital is often regarded as a problem to be managed rather than an opportunity to be seized, and there are good reasons for this prevailing mindset. The core aspiration of wealth firms—to be trusted advisors to their clients—requires a human touch, meaning the precise role for digital is not always clear.

Our most recent research debunks persistent myths about client attitudes towards digitalization in the wealth management industry. Today, it appears that attitudes towards digital services are changing regardless of the generation in question, and wealth firms are under increasing pressure to incorporate digital solutions into their technology toolkits.

Evolve or Dissolve

It is often assumed that openness to technology is the attitude of millennials, and that the mature, often ultra-wealthy investor is happy to leave the growing of their wealth in the hands of an advisor with annual updates. Our latest study suggests that across the wealth scale and age groups, there are preferences towards digital, that if recognized, can mean the difference between evolving or dissolving for the wealth firm.

Digital take-up is visible across the board. From those with only $100 to invest to ultra-high net worth (UHNW) clients worth $10 million, investors are already embracing online platforms in some way for the management of their wealth. Nearly nine out of 10 respondents use them to complete some investment activities, and about half independently search for or even purchase new investment products through them. Only a tenth of our sample is unwilling to try these services.

Among UHNW individuals, advisors are most likely to see access to execution capabilities (59%) on their list of technology uses. Overall, the vast majority of respondents this year (82%) expect their primary advisors to enhance the online investment process over time.

This trend appears to be a continuation of findings uncovered in last year’s survey. According to 2017’s research, 44% of HNWIs handle interactions with their wealth managers online. Furthermore, the wealthiest investors were the most digitally active. The 2017 survey also indicated that the proportion of interactions conducted online was 48% among those whose wealth exceeded US$20 million.

The Generational Divide

Many fintech firms are already taking advantage of this interest in new technology and making a long-term play for younger investors. Their approach is to onboard customers at an earlier age than is typical in the industry, knowing that the trusting relationships forged will pay dividends once these individuals require investments that are more sophisticated.

Millennials may require more than their older counterparts to feel supported. According to last year’s survey, 90% of HNW baby boomers (those aged 55-74) believe wealth managers were effectively supported by quality investment information, communications tools, and investment technologies. However, that belief dropped by more than 20% for respondents under the age of 35, only 66% of whom felt that technological support met appropriate levels.

That is not to say financial advisors should ignore older generations in lieu of attracting younger investors to improve profitability. Our research shows that while those over 55 are less likely to search for or make investments online, more than half readily do so. Their activity ranges from topping up model portfolios and stocks and shares ISA products, to more advanced trading. Over the last three years, our research has also consistently indicated that Gen-Xers are sweet-spot clients who mirror millennial views.

What this means is, regardless of preconceived notions concerning how different age and wealth groups engage with technologies, wealth managers can and should use new technologies to improve portfolio management and deliver better investment outcomes across client segments. For advisors’ most valued clients, firms can deepen relationships by considering differentiators in the customer experience, many of which today can come from the on-demand support and service that are offered through digital channels.

With digital technology, wealth firms have an opportunity to make their delivery models more efficient and to boost the productivity of their advisors. To maintain relevance in the face of progress, wealth managers need to embrace technology or risk becoming outdated.

This article originally appeared in Asian Private Banker.

Download: Making Digital Pay

Philipp Zerhusen

Vice President, Director, Digital Wealth Solutions

Mr. Philipp Zerhusen is Vice President, Director Digital Wealth Solutions and Market Development at FactSet. In this role, he is in charge of Market Development as a Director for FactSet Digital Solutions GmbH and is responsible for various market segmentation, strategy, and prizing projects. Based in Frankfurt, Mr. Zerhusen has worked in the financial industry for 25 years. Before his current role, he held various international management and senior enterprise solutions roles across EMEA at Thomson Reuters, founded a number of start-ups, and worked for several years in Asset and Wealth Management at Sal. Oppenheim. Mr. Zerhusen earned an MBA from the University of Cologne and a professional banking diploma.


The information contained in this article is not investment advice. FactSet does not endorse or recommend any investments and assumes no liability for any consequence relating directly or indirectly to any action or inaction taken based on the information contained in this article.