Wealth managers in Asia-Pacific should prepare to convert and capitalize as clients consider switching providers, according to EY research
Singapore, 9 May 2019
- 34% of Asia-Pacific clients plan to switch wealth providers in the next three years compared with just 15% of clients changing providers in the past three years
- More than half of clients (55%) across Asia-Pacific prefer mobile apps over any other relationship channel, increasing from 14% in 2016
- Wealth managers need to demonstrate value, refine their fee models and leverage digital to differentiate and win in the market
Wealth management relationships are undergoing a significant period of change as more than one-third (34%) of wealth management clients plan to switch providers in the next three years across Asia-Pacific, according to the EY 2019 Global Wealth Research report. This is driven by emerging digital solutions, new digital habits and changing definitions of what clients value, with clients in Australia, mainland China, and Japan among the most likely to switch providers.
With no sole provider able to solve respondents’ varied needs, wealth management clients are currently maintaining relationships with more than five different types of providers. As the industry grapples with new entrants, new technologies and changing client expectations, wealth managers must take a step back to evaluate their offerings and redefine how they provide financial advice to better meet client needs and expectations.
Elliott Shadforth, EY Asia-Pacific Wealth and Asset Management Leader, says:
“There is the potential for a significant movement of clients across the region as they look for providers who can better meet their evolving needs. With a multitude of options for wealth management providers available to clients, especially with the intensified competition among incumbents and new entrants, firms will need to continuously raise the bar for satisfying client demands. Those who understand and deliver on what matters most to their clients, such as anticipating their major life events and proactively adjusting accordingly, will be best positioned during this period.”
Clients are seeking a new generation of digital engagement
Digital channels are evolving faster than wealth managers and their clients anticipated three years ago. More than half (55%) of respondents in Asia-Pacific prefer mobile apps as their primary engagement channel for wealth management, compared with just 14% in 2016. Asia-Pacific is the highest adopter of mobile apps, with the global preference sitting at just 41%.
In-person and phone interactions continue to decline as the primary communications channel among wealth management clients, down from 40% in 2016 to 19% in 2018 and projected to fall below 15% in future. However, there will still be a role for human advice delivery: wealth managers will need to focus on areas where they can add most value, reconfiguring their digital delivery model to meet new expectations from clients.
EY research shows that the value of digital channels increases with the level of investable assets. More than half (59%) of clients across Asia-Pacific say 24x7, any device, anywhere digital access is the most important element when interacting on digital channels with their wealth manager – this highest in Singapore at 68%. Meanwhile, 63% of clients in mainland China place greatest value on tech simplicity and intuitive wealth processes when interacting through digital channels.
When it comes to emerging technology, just 2% of respondents in Asia-Pacific prefer digital and voice-enabled assistants as a primary channel today. However, 16% say they would prefer this channel in the near future. This future demand for digital assistants is greatest for receiving financial advice (33%), an area where advisors today are expected to provide greatest value to clients. Adoption of digital assistants across the sector will likely be influenced by the regulatory environment in each Asia-Pacific market.
Mark Wightman, EY Asia-Pacific Wealth and Asset Management Advisory Leader, says:
“As wealth managers prioritize their digital investments across multiple channels, they need to consider how client engagement may evolve in the coming years. This may mean reallocating budgets from websites to mobile apps and voice-enabled services sooner than planned, and capitalizing on hybrid models where clients have access to both digital tools and human interaction. While much of this technology might not be readily available in the market today, it provides a clear indication of what clients are looking for when engaging with their wealth manager.”
Fee transparency can drive greater understanding and awareness
While two-thirds of Asia-Pacific wealth management clients have full awareness and understanding of wealth management fees, EY research shows that one-in-ten clients say they don’t understand fees at all. For in the relationship itself, transparency plays a very significant role. Percentage of AUM and hourly support are currently the most common payment method; however, fixed fee models are most desired across Asia-Pacific.
“Wealth managers realize that clients expect more than just strong investment performance, but struggle to differentiate and communicate the value of their offerings and services. The answer is not simply lowering fees, but rather a combination of increasing transparency and predictability when it comes to pricing models, and equipping advisors with ways to communicate value beyond investment returns.”
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About EY Global Wealth Research Report
EY worked with ESI ThoughtLab to conduct a comprehensive survey of 2,000 wealth management clients in 26 markets globally – including 575 wealth management clients across six Asia-Pacific markets – and spoke with 50 different wealth management executives globally to understand what they value most in their wealth management relationships across quality, products, services, technology, pricing and personal attention.