With up to half of their net income at risk due to poor digital capabilities, wealth management firms will need to explore partnerships with fintech upstarts to ensure their long-term success, according to a report from Capgemini.
Based on a survey of 5200 high net worth (HNW) individuals and 800 wealth managers across 23 countries, Capgemini's World Wealth Report suggests that there is limited digital maturity in the industry, despite surging demand from clients.
HNW client demand for automated advisory services has shot up nearly 20 percentage points over the last year, from 49% in 2015 to 67% in 2016. Additionally, 47% say they now use peer-to-peer platforms at least weekly to find out about investment ideas.
Nearly three quarters of clients say that digital maturity is very or somewhat significant in their decision to increase assets with their wealth management firm over the next 24 months, a percentage that increases to 86% for respondents under 40.
The wealth managers quizzed by Capgemini are also demanding digital tools with richer functionality. Yet less than half of wealth managers are satisfied with their firm’s technological capabilities, despite citing digital tools as valuable in supporting a number of functions, including increased collaboration with clients and the ability to better leverage client data to identify growth opportunities.
Social media and mobile tools are especially lacking, with 60% of wealth managers saying that prospecting through social media is an important digital capability they require, but is the area with which they are least likely to be satisfied.
More than three quarters of wealth managers say they would like to pilot new digital tools, and more than half have already lobbied their firm to improve capabilities. Some 42% have even invested their own money to purchase off-the-shelf software in an attempt to plug gaps in their firms’ offerings.
Capgemini notes that companies are beginning to wake up to the problem, with several of the world’s largest firms currently exploring accelerator programmes designed to attract startups, while others are partnering, investing in or acquiring robo-advisors.
Anirban Bose, head, global banking and capital markets, financial services business unit, Capgemini, says: "The latest World Wealth Report findings reinforce the need for firms to adapt to meet evolving client and manager expectations alike, as nothing less than a high level of digital maturity will be adequate in the face of digitally-native competitor providers."