Sponsored by Factset 
Investors across the wealth scale—from the mass affluent customer with $250,000 to invest to the ultra-high net worth (UHNW) client worth $10 million—are already embracing online platforms. According to FactSet’s 2019 research, nearly nine out of 10 respondents use online platforms to complete some investment activities; about half independently search for or even purchase new investment products. Only a tenth of our sample is unwilling to try these services.
Source: FactSet and Scorpio Partnership, Digital Wealth Management: Winning Clients in the Hybrid Advice Era (2019)
Fintech firms are already taking advantage of this interest in new technology and are making a long-term play for young investors. However, our research highlights a new set of profiles based on respondent readiness to adopt new technology in wealth. Rather than focusing exclusively on age, firms must prioritize the requirements of the so-called Early Adopters among their clients, who will be the first to trial and assess new functionality. These individuals self-categorize as “tech evangelists” and their patterns of usage will determine platform success or failure. Their views deserve precedence, given they have an average net worth of $5.82 million.
Early Adopters are willing to have more online interactions with their wealth managers, but they are unlikely to bother if their early experiences are subpar. For example, glitches and slow speed are problems for about a quarter of these individuals. Equally frustrating is that security concerns are running up against their expectation of quick and pain-free login procedures.
Appearances Really Do Matter
For investors as well as firms, the value-drivers of the online wealth proposition center on portfolio optimization. Clients believe an interactive and instant-access approach to investment insights would improve how their portfolios are managed. Forty-six percent say that real-time analysis of performance is an urgent priority; the same proportion believes that real-time reporting of their investment positions should be an area of focus.
Source: FactSet and Scorpio Partnership, Digital Wealth Management: Winning Clients in the Hybrid Advice Era (2019)
There is other low-hanging fruit for wealth managers. For instance, 42% of investors believe that they should receive proactive suggestions for investment opportunities that are tailored to their interests. A sizeable minority (40%) would also value automatic rebalancing of their portfolios in response to events, such as spikes in volatility. Wealth managers are expected to bring together their understanding of client tastes and tolerance with new technology to improve the online proposition.
Fintech challengers intensify the competitive pressure and are well-positioned to address the needs of these segments through a relentless focus on platform experience. These firms are already starting to pull ahead by reconsidering how performance data could be visualized. Advisors that focus and invest in this area not only have an opportunity to deliver added value to clients; they also have a chance to be the standard-bearers on an emerging priority for the entire industry.
Unlock Profitability Through Hybrid Advice
While most financial advisors would like to focus intently on their UHNW clients, they must also seamlessly support customers further down the wealth scale. Digital offers a viable path forward. The so-called “hybrid-advice model” can be used to transition costly-to-serve customers (usually mass affluent) online to complete most of their investment activities. Human advisors remain accessible for value-added interactions but are freed up to focus on wealthier investors. At the same time, firms do not lose out on the large proportion of the market that needs investment services but is difficult to support profitably.
For mass affluent investors, a critical advantage that could be offered by an online platform relative to an offline experience is access to interactive planning tools. They anticipate the positive impact that a more dynamic relationship with their wealth could have on their longer-term trajectory. These clients are willing to mostly self-serve online if they continue to receive tangible evidence of their wealth managers’ expertise.
Conclusion
Harnessing the digital opportunity requires a shift in mindset among traditional operators, and perhaps even taking a lesson or two out of the fintech playbook. Firms should address the pain points holding clients back from interacting with them online. They should assess which functionality will nudge costly-to-serve customers to do more wealth management themselves, as well as which platform features would grow the volume of UHNW assets under management.
Crucially, advisors should also go further and make full use of the transformational potential of new technology. The most successful firms will introduce tools on their platforms that enable more effective portfolio management through real-time analysis and reporting. These digital investments are intuitively prioritized by investors because they are tangible and deliver financial value.
