On the road to digital?
Wealth management and private banking firms need to have significant digital provisions to keep up with growing demand from the wealthy
The wealth management and private banking industry has gained a reputation for being behind in the digital innovation race in comparison to other industries. In a world where Apple and Amazon have made technology an expectation rather than merely an added bonus, the wealth management industry cannot ignore the general mega trend towards digital.
In the retail banking sphere, digital channels are gradually becoming more ubiquitous and are replacing the function of branches. However, the wealth management and private banking industry is traditionally associated with face to face contact where the advisory role of a relationship manager (RM) is key when managing assets of large value, and advising clients on their portfolios. Clients are also engaging in personal contact due to the complexity of some of the issues that they face, such as regulatory issues, therefore much weight is held in the expertise of their RM.
In comparison to functional retail banking digital channels, private banking digital channels have greater requirements to add real value for a client. As opposed to merely checking balances and performing basic bank transfers, private banking clients may want to view more detailed portfolio information, as well as more sophisticated engagement capabilities such as receiving financial advice.
A survey of high net worth individuals (HNWIs) from Capgemini and RBC Wealth Management, World Wealth Report 2014, reveals that 55.6% of European wealth management clients say that most or all of their relationship is conducted via digital channels and 61.5% expect their wealth management relationship to be digitised in the future.
The same report from Capgemini and RBC suggests that 62.7% of HNW European clients would leave their wealth management firm, due to a lack of integrated channel experience. This figure is even more significant in regions such as Asia-Pacific (82.8%) and Latin America (87.1%).
The report also reveals that 50% of HNWIs under 40 would leave their wealth manager if there was no way to engage digitally. However, clients over the age of 60 are far less likely to be swayed by a lack of digital offerings, with 20.5% saying that they would leave. This figure is more significant to the private banking and wealth management industry, as the concentration of ultra high net worth individuals (UHNWIs) and HNWIs is still biased towards the baby boomer generation.
However, wealth will eventually shift towards generation X and Y and there will be an expectation of greater digital capability from the next generation of wealthy individuals.