Wealth Managers Can't Rely On Client Loyalty Any Longer - Study

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Wealth managers cannot count on clients staying loyal and richer customers are most likely to switch providers, according to EY, the consultants.

About a third of clients have changed managers over the past three years, which also suggests that firms cannot count on customers staying loyal, EY found in its 2019 Global Wealth Research Report. The organization surveyed 2,000 wealth management clients across 26 countries.

“According to our recent global research study of wealth management clients, one-third of clients have switched providers or moved assets in the past three years and another third plan to do so in the next three years. These shifts are happening across client wealth levels and demographic profiles,” the report said.

Such results highlight why wealth firms across the world are scrambling to provide more added-value services, improve client reporting, strengthen brands to retain clients, and prospect for new business among younger adults, such as Millennials.

“Clients are identifying specific providers to fill certain needs, resulting in an increased number of financial provider relationships. On average, clients maintain relationships with five different types of providers, leading to a greater number of individual firm relationships and increasing complexity for the client,” it said.

EY said that wealthier clients in the ultra-high net worth brackets are more likely to switch firms than those lower down the wealth spectrum.


Some 39 per cent of UHNW clients say they plan to switch or move money from a wealth management provider in the next three years, compared with just over one quarter of high net worth (HNW) and just under a third of mass affluent clients. EY said this outcome is expected, as UHNW clients are most likely to diversify their assets among a greater number of wealth management providers.

Regional differences

The report said a desire to switch providers varies across global regions and the desire to move has also adjusted. According to figures for the Americas and Europe, fewer clients are planning to switch providers in the next three years than have done so over the last three.

There is more ferment in Asia, particularly in China, where new, emerging digital methods and habits are being driven by fresh digital solutions. The percentage of clients expecting to transfer assets is expected to more than double in this region, from 15 per cent over the last three years to 34 per cent in the next three.

There is continued angst about how wealth managers earn a living. Some 46 per cent of wealth management client respondents are not happy with their fees and are not confident that they are being charged fairly. UHNW clients are particularly unhappy, at 66 per cent.

Firms must think harder about how to retain clients and adapt business models, the study said.

“While traditional wealth institutions - including commercial banks, asset management firms, online trading platforms and private banks - will remain a prevailing market force, our findings show their use by clients may start to peak,” the report said.

State of independence

The report said the attractions of independent advice are growing, which also suggests that a water-tight definition of independence is important, raising questions about how advisors are paid, their alignment with the long-term interests of clients, and other considerations.

The study said that the use of independent financial advisors is “expected to rise rapidly”, with an 18 per cent increase in clients globally who expect to use independent advisors in the next three years, and a 14 per cent increase for independent advisory firms - fuelled by above-average growth in Asia-Pacific.

The report noted that historically, the wealthiest clients have made greater use of the independent advisory channel; however, the expected growth over the next three years will be highest in the mass affluent (34 per cent today to 42 per cent expecting to use) and HNW segments (34 per cent today to 40 per cent expecting to use).

Fintechs rising

The percentage of clients expecting to use fintech solutions will increase from 38 per cent today to 45 per cent in the next three years, the report said.

“Expected fintech use over the next three years is expected to increase with each client wealth segment, with 35 per cent growth expected among mass affluent clients (28 per cent today to 38 per cent expecting to use) and 41 per cent growth among HNW clients (29 per cent today to 41 per cent expecting to use),” it continued.

Many clients are not confident that they are being charged fairly by their provider, and a majority want to pay differently. Forty-five per cent of clients do not trust their wealth manager or advisor to charge them fairly. The client segments that are most profitable today and most promising for tomorrow are unfortunately the ones that are most dissatisfied.

The study said that the rise of new tech-driven business models is changing how people view paying for wealth advice - a trend that is particularly marked among younger people. Six out of 10 Millennials and eight out of 10 clients with high investment knowledge expressed such views.





Source - Family Wealth Report

Nick Kalikajaros 2019