EY Luxembourg has announced the publication of its 2015 global wealth management report, which found that 40% of all clients surveyed are open to switching wealth managers under the right circumstances.
According to the report, entitled "The experience factor: the new growth engine in wealth management", up to US$200 bn in global revenue is in a precarious position with firms that fail to make strategic investments to the benefit of clients risking losing a substantial portion of their current business.
An impressive 73% of clients surveyed are tied to multiple wealth managers, with reasons such as "better pricing", "better portfolio returns" and "breadth of products and services" cited by 57% as adequate motivation for them to consolidate their assets with fewer wealth managers.
Over 2,000 wealth management clients from a variety of backgrounds and deomgraphics were surveyed by Oxford Economisx for the report, with EY additionally conducting interviews with more than 60 welath management executives worldwide to reveal their thinking and investment practices.
"This research should make the industry sit up and take notice," warned Olivier Maréchal, Financial Services Advisory Leader at EY. "The rules of the game have changed. In order to attain growth, managers must now learn to compete with man, machine and hybrid-based firms to retain and attract new assets."
50% of wealth managers across the world indicated that revenue growth will take centre stage in their strategic business priorities over the course of the next few years, particularly in Europe and the Americas. Specific initiatives to this effect will focus on enhancing the client experience.
According to the report, client experience in wealth management is unique and complex, with respondents saying that they value performance, engagement and trust most in their wealth managers - values on which clients and firms are largely aligned. However, firms are out of step in terms of transparency, with clients eager for a level of transparency that includes rating their advisors; advice channels, to which clientele are significantly more open than and the role of the advisor, a position which may become more like a financial therapist in the future by helping clients with spending habits or life goals rather than merely just providing standard asset allocation advice or other activities that could be automated.
"In an industry where advances in technology, new types of competition and client expectations are changing rapidly, firms that challenge traditional norms while remaining true to their core value proposition will be better positioned to succeed," continued Maréchal. "Delivering a comprehensive client experience is the linchpin that will make or break a firm in this wealth management landscape.
In Luxembourg, the last three years have witnessed a focus on expanding product portfolios and on actively managed products in order to better meet clients’ needs. Firms have experienced a strong decline of margins, which can be explained by a change in client profiles. Small, high-margin clients have been replaced by bigger, lower-margin clients. Historically low interest rates and rising costs compound the difficulties faced by wealth managers in Luxembourg.
This shifting focus to client goals is expected to continue in the years to come — to a greater extent than in the broader European market — with a more marked interest for discretionary services and active management. This shift is driven by the direct focus on client needs, as well as by the need to improve margins and respond to changing regulations.
Meanwhile, the advisory service model is expected to evolve in the coming years toward a team approach. This trend seems more pronounced in Luxembourg than in the rest of Europe or in Switzerland."
