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EY Client Report Details Good, Bad, and Ugly News for Wealth Managers

Changing investor preferences — across ages, geographies, and levels of wealth — could play into strengths, or cause pain, at advisory firms.

There is no client crystal ball (or is there?) but a new report does show what investors do and don’t want in the future, and what they are willing to pay more for.

The latest report on wealth management clients by EY affirmed the findings of another recent survey: The Covid-19 pandemic has had “far-reaching effects” on clients and younger ones want to engage their wealth manager using more technology. However, the effects “go far beyond investors’ ever-growing appreciation for digital channels.” 

“Clients are becoming more risk averse, are increasingly focused on achieving personal goals aligned to their purpose, and want to enhance their financial protection, diversification and security,” according to EY.  

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“As they contemplate their providers, clients value a range of tangible and intangible factors that span three key dimensions of the wealth experience: the expectation of core services they receive, how they engage with those services, and their ability to achieve purpose with their wealth.”

Basic investment products and services are now available at a low cost and table stakes. “Tailored experiences” will be the key drivers of pricing in wealth management and clients are more than willing to keep paying current fees commensurate with the service they are getting. Out of 2,500 wealth management clients in 21 geographies, many said they would be willing to pay more for better experience-related services. 

“Better, exclusive and more reliable digital services” were something clients said they were willing to pay more for. That includes improved quality and quantity of contact with their financial advisor, as well as financial training and education. They also want access to specialists in financial services, the ability to view all their products or wealth in one place, and more personalization.

Wealth managers who offer those things will have an easier time retaining clients. 

Almost half of clients globally (and 60% of clients in North America) would prefer to consolidate their products and services with one financial services company in the future. Aggregating that information could help clients (in the form of better financial planning) and wealth managers (who can discover and manage more assets, making clients less likely to leave

Still, clients might not be as willing to share information as wealth managers think. Most are willing to share personal contact information and their goals. But only 47% are willing to share investment data from other companies with their wealth manager. Fewer want their financial advisor to know what they are spending, the loyalty programs they participate in, or what they are doing on social media. 

Wealth managers are underestimating demand for ESG portfolios, and at least one consultant says if wealth managers “don’t want to get fired” they need to become serious about impact investing.

Wealth managers should also consider their own diversity and inclusion efforts — it is a factor that matters to clients, according to EY. 

“Given this picture, it’s vital for wealth providers to effectively serve the full diversity of their client base. There are positives for the industry here. When it comes to value for money, cost transparency and fiduciary standards, LGBTQ and many ethnic minority clients’ views of their providers are comparable with those of their heterosexual and white counterparts,” EY’s report says. 

“Our survey confirms that these minority client segments see their wealth managers as providing similar positive day-to-day experiences to those of the wider client base.”

Michael Thrasher (@Mike_Thrasher) is a reporter at RIA Intel based in New York City.

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