APAC wealth clients want more personalised service, plan greater use of virtual and digital tools post COVID-19: EY report
ESG and impact investing have become a growing area of focus for Asia-Pacific clients and a differentiating factor for wealth managers.
Over three-quarters (76%) of wealth management clients in Asia-Pacific are willing to pay more for personalised service, according to the 2021 EY Global Wealth Research Report. In exchange for greater personalization, the majority of wealth management clients (70%) are willing to share personal data with their primary wealth manager, a higher proportion than those willing to share with doctors, retailers, technology firms and media platforms.
Wealth clients in the region have accelerated their use of digital technology during the COVID-19 pandemic and this seems certain to lead to permanent changes in the behavior of firms and investors. The report showed that 64% of respondents in Asia Pacific plan to use more digital and virtual tools, while 61% said they plan to engage more with their advisor virtually. As a result of the pandemic, however, 49% of respondents expect the relationship with their wealth manager or advisor to become less personal from a human interaction perspective.
Based on a detailed survey of 2,500 wealth management clients in 21 geographies, the 2021 EY Global Wealth Research Report uncovers what investors value in their wealth management relationships and how it changes across service models, engagement choices and value-aligned advice.
Elliott Shadforth, EY Asia-Pacific Wealth & Asset Management Leader, says: “There’s no doubt the shift into digital is here to stay. Customers are increasingly relying on these tools to analyse their investments and manage their wealth more efficiently, but financial services firms have to find a way to also leverage technology to bring more value and curated options, bringing a whole new experience to each interaction they have with their clients."
Continued focus on pricing and value
The vast majority of Asia-Pacific respondents (89%) are aware of trading and product fees, yet half of them (50%) remain concerned about hidden costs when working with their wealth manager, suggesting there is scope to improve transparency and education.
Wealth management clients want to change the way they pay for specific wealth and investment services. For discretionary investment management, there is growing preference for performance-based fees, which creates a stronger perception of alignment between charges and value creation. However, for basic wealth offerings like portfolio reports and life goals coaching, 16% and 8% of respondents respectively expect to receive them at no cost by 2024.
“The notion of what value really means in wealth management is rapidly changing and technology has a big role to play in elevating experiential factors so that they’ll become key drivers of pricing going forward. We know people are willing to pay more for a better experience and leading firms will be focusing more and more on these value-added products and services to meet their clients’ evolving needs,” Mr Shadforth said.
Clients place greater emphasis on purpose, with D&I becoming increasingly important
Beyond purely financial outcomes, the research finds that wealth management clients are looking to build purposeful investment portfolios and wealth relationships. The vast majority of respondents in Asia- Pacific (89%) have personal sustainability goals, higher than the 78% global average who said the same, yet 59% feel their wealth manager falls short in understanding their values. At the same time, interest in specific environmental, social and governance (ESG) themes has increased over the past year.
In light of this, a major reallocation of investments could be in the cards – with 88% of respondents believing it is important to consider ESG parameters in their portfolios and impact investing is expected to grow through 2024, reaching an average adoption level of 52% from 45% in 2021.
According to the research, two-fifths of those surveyed in Asia-Pacific (43%) want to consolidate all their financial relationships in one place – across private banking, wealth, insurance and investment services – but 72% of those who would like to consolidate have yet to choose a sole provider. Even among investors who prefer multiple financial providers, 33 % say they would pay more to access a consolidated view of their investment portfolios, pointing to a greater need to deliver an ecosystem of financial services.
One deciding factor in provider choice will be a firm’s diversity and inclusion (D&I) practices. Wealth management clients surveyed increasingly view D&I as a sustainability goal and a key driver of provider choice with 59% seeing D&I efforts as important when evaluating a wealth manager. This rises among millennials (72%), the ultra-wealthy (60%) and in markets such as China (68%) and Singapore (63%).
Mark Wightman, EY Asia-Pacific Wealth & Asset Management Consulting Leader, says: “The growing focus and interest on ESG and impact investing present a huge opportunity for wealth managers in the coming years and the winners will invariably focus on understanding their clients’ values and offering a broad choice of ESG investing options, tailored guidance and advice. Wealth managers that can offer a combination of bespoke advice and niche investments will become increasingly popular as global demand for more holistic approaches to wealth management rises. There’s a lot to gain also from seeking collaboration with other providers, from health insurers to competitors, in order to deliver an ecosystem for clients.”
Read more : 2021 EY Global Wealth Research Report