Most advisors may be seriously off target when it comes to technology and demographics, according to new research from fintech firm Refinitiv.
Nearly 90% of billionaires across all age groups in a global survey of investors and wealth managers said that their preferred channel for engagement with their financial provider was a mobile application, according to “Debunking Wealth Management Myths: 3 Outdated Assumptions About Investors”, a recent Refinitiv report.
Myth One: Technology Is For The Young
The finding about billionaires is evidence of Refinitiv’s first myth: that digital savvy remains the preserve of millennials and younger generations. In fact, Refinitiv’s research found that older and wealthier clients prefer digital channels as much or more than millennials.
“There’s this notion that people prefer to talk to advisors and they’re not engaged and looking at technology, especially if they are wealthy, but that’s not the case,” said Sabrina Bailey, Refinitiv’s global head of wealth management. “There’s now mainstream use of digital media across the board for all elements of life, and it’s finally seeping into financial life.”
The stereotypical older client still prefers the face-to-face meeting, but the study found that baby boomers of all wealth levels were just as likely to prefer face-to-face meetings (47%) as millennaiils (46%). What’s more, just 41% of the ultra-high-net-worth segment of the study preferred face-to-face meetings.
Mobile devices, on the other hand, were preferred by 89% of boomers and 89% of millennials for advisor-client meetings.
The Covid-19 pandemic has accelerated a shift within all generations towards digital channels like provider’s websites, virtual conferencing and mobile applications, said the study. Yet there were low levels of interest in communicating by e-mail, messaging applications, social media or text.
“An inability to get together in person has helped create this shift. I think there were some notions before about the safety of interacting digitally, a feeling of risk, but the pandemic was a tipping point,” said Bailey. “People also realized that time is the one resource they can’t get more of, and with virtual conferencing they can save 30 minutes to an hour of time just by engaging virtually every quarter rather than face-to-face. It would be very hard for people to give up that newfound time.”
Myth Two: ESG Is For The Kids
Similar to digital communications, another pervasive wealth management myth states that only younger investors, like millennials, are really interested in ESG, according to the study.
Refinitiv’s research found tepid interest in ESG investing among both boomers and millennials, with boomers expressing significantly more interest than younger investors. Baby boomers were more likely (15%) than millennials (10%) to plan to invest in green bonds, invest in ESG funds (32% to 22%) and use advice on social impact (36% to 29%) over the next decade.
However, among the ultra-high-net-worth segment, 61% said that they would seek ESG investment advice, and many (46%) reported moving large proportions of their assets to find a firm with a culture more aligned with their social value over the course of the last year.
“We feel like this did accelerate during the pandemic,” said Bailey. “My perspective is that people now have a lot more time to think about the impacts they have on the people around them and the environment they are living in. They also ended up with more time to research ESG issues, and at the same time, mainstream organizations in the financial industry are continuing to write about and educate on ESG.”
Myth Three: It’s All About The Personal Relationship
Refinitiv’s third myth is perhaps the most shocking: For decades, the wealth management industry has seen itself as built through personal relationships between advisors and their clients, often sealed with a handshake, with technology as a relatively less important factor.
However, Refinitiv’s research found a plurality of investors, 49%, naming digital experience as the most important criteria they consider when selecting firms—making technology the most often named element in the study, ranking ahead of ethical business practices (48%), active management products (48%) and tax-efficient products (48%).
“This requires firms to think about how they will build trust in a different way,” said Bailey. “When we think about the digital experience, most banking transactions now happen online. People interact with their retirement accounts online. I don’t believe interpersonal connections will ever go away, but it’s become more important to start to build trust through digital interactions and then find ways to seal the business relationship with a personal relationship that is build on the client’s story. Clients want their whole business, from banking to insurance, and their whole financial life in one place, and they can then engage with advisors at a different level that relates to who they are and where they want to be.”
In other words, investors aren’t loyal to a firm because of its brand or the charming personality of its advisors—they want a great experience.
Yet just 18% of investors say they are satisfied with the digital experience offered by their wealth management provider.
Still, the chief reason investors change wealth management firms is performance, not technology or access to ESG investing, according to the study.
“The biggest impact we’re going to have on the wealth management space is if we’re all willing to step back and eliminate our preconceived ideas and look more thoughtfully at what we can do to better help the end investor,” said Bailey.
For the study, Refinitiv tabbed research firm ThoughtLab to survey 2,325 investors and 500 wealth and asset management firms across three regions and fifteen countries.