Sink or swim: Why wealth management can’t afford to miss the digital wave


The world is living through one of the most transformative times in human history. The rise of technology has altered how we live and the speed with which we engage with one another. But how does this impact wealth management — a proposition predicated on personal service, where clients pay for solutions and advice tailored to their individual investment goals, day-to-day financial needs and attitudes to risk?

Time to move beyond human capital

Until now, wealth management’s personalised response has relied on human effort. But digital and algorithmic innovation is creating the possibility of more and more of the wealth manager’s role being delegated to technology and, in turn, is potentially opening up the sector to new FinTech players with very different ways of doing things.

Wealth management firms cannot assume that length of experience, brand prestige or even the quality of their client relationships will insulate them from this possibility. As we report, current levels of satisfaction and advocacy among wealth management clients are modest at best. Plus a younger cohort of high net worth individuals is emerging, whether through their own enterprise or wealth transfer. As millennials grow in economic power, firms will be courting a tech-immersed generation that has grown up in a world of economic instability and who are, as a result, highly adaptable, restless and fickle in their choice of brands and service providers.

Keeping ahead of digital disruption

Today, 83% of business leaders surveyed in a PwC global survey of the financial services sector believe they are at risk of losing business to standalone FinTech companies, and wealth management is seen to be one of the sectors most vulnerable to disruption, with more than a fifth of such business believed to be at risk.1 To survive in a digital world that is evolving at breakneck speed, wealth management firms urgently need to take action to demonstrate their value to existing and future clients – and to keep pace with the new waves of digital opportunity that are emerging.

In this report, we draw on quantitative research with more than 1,000 high net worth individuals in Europe, North America and Asia, plus qualitative interviews with 100 relationship managers and a number of CEOs of wealth management firms and FinTech innovators. This unparalleled access allowed us to assess the appetite and expectations among the world’s wealthy for digitally driven solutions and, by contrast, the unreadiness among wealth managers to meet this appetite. We also examine how technology could help advance the role of wealth management firms, deliver efficiencies and allow their proposition to remain compelling and distinctive in the face of competition from tech-driven newcomers.

Wealth managers currently rank among the slowest adopters of digital technology in the global financial services sector. Now is the time to start making up lost ground. We hope this report will provide a starting point to do so.

About this report

The findings of this report are based on research conducted in late 2015 and early 2016 for PwC Strategy& by Wealth-X, global specialists in wealth intelligence. Quantitative research was conducted with 1,010 high net worth individuals with US$1 million+ in investable assets in Europe, North America and Asia, to assess their attitudes to their wealth, their use of technology and the role of professional wealth management in their lives.

This was supported with qualitative interviews with 100 client-facing relationship managers who work in wealth management firms, including the wealth management arms of major banks, primarily in Europe, North America and Asia but also Latin America and the Middle East. Finally, a selection of senior executives of established wealth management firms and CEOs of FinTech wealth management companies were interviewed about their strategic aims for technology in their business and quotes from these are included throughout. This data has been overlaid with insight from PwC’s financial services, digital and wealth management specialists in Europe, the US and Asia. PwC would like to thank all contributors for their insights and involvement in the development of this report.

In this report we first explore expectations among high net worth individuals for wealth management and their use of digital technology in both a financial and non-financial context. We then assess attitudes to, and provision of, digital technology within the wealth management industry. Next we explore digital opportunities that the wealth management industry is powerfully positioned to exploit. Finally, we illustrate short to long-term strategies that the sector could adopt to embed digital into their operations, culture and value proposition.

Conclusion: Making digital personal by making the personal digital

The wealth management industry now needs to provide both its current and future clients with a substantially evolved service model or risk losing market share. Faced with low levels of client advocacy and a rising appetite among its target audience for digitally-enabled living, CEOs of traditional wealth management firms need to accelerate their efforts to integrate technology into their business. By overestimating their current technology offering, firms are now critically vulnerable to FinTech innovators who can present the world’s wealthy with slick and highly personalised ways to manage and coordinate their assets, and leverage their real-time personal data continuously to make better financial decisions.

“I think the part that is a little bit overhyped is that there’s this whole generation that wants to deal digitally. I think, when the people who now deal digitally, i.e. the millennials, are 50 years old they’ll act like 50-yearolds. They will be more digitally aware 50-year-olds than today’s 50-year-olds but they’ll still be 50, right? I think we have to recognise that.”

CEO of wealth management busines

Standing apart in a digital world

But serving the world’s wealthy demands a fine balancing act. Wealth managers are right to believe that personal service and the rapport that clients have with their personal advisor are a key differentiator from other financial offerings. This point of differentiation is likely to become even more valuable as more and more transactional financial services automate, from banking to share-dealing to pure portfolio management.

It is also important to acknowledge that high net worth individuals are heavy consumers of personalised advice in all aspects of their life. The reassurance and value of having a trusted brand and a named wealth manager, or wealth management team, may continue to hold true even for digitally-savvy younger generations. Indeed, one of the biggest risks the financial services industry can take is adopting business models that assume future clients will want to do everything remotely and online.

“The next generation have absolutely no patience dealing with people who only know paper and can’t use a smartphone. They don’t need to have the patience either, because there’s always a way they can find someone to do it, or they can find a way of doing it online themselves.”

Relationship manager, APAC

But this personal, human relationship will need a robust digital underpinning to achieve four critical goals that are now critical to survival:

  • To expand the wealth management proposition: Simply offering investment management that can be replicated by algorithm-driven technology is no longer an option for the wealth management industry. Firms will need to explore how they can better harness their position as trusted custodians to capture and centralise more client data, then blend this with their human capital, to help clients navigate the complexity of their financial and non-financial life more efficiently than ever before.
  • To embed a true digital culture: Digital needs to be embedded from the ground up, from back office to boardroom. Firms that are not genuinely digital across all their operations cannot expect to be digitally progressive in how they serve clients.
  • To broaden the ‘path to purchase’: If digital natives are going to be in the majority, then the acquisition strategy is also going to have to be increasingly present in the channels in which that audience spends most of their time. Alongside the traditional tactics of branch referral, personal recommendation and print advertising, far greater use will need to be made of, for example, online search optimisation, affiliation with relevant online websites, including provision of content, and distribution of free apps to raise brand awareness. As discussed, robo-advice services should also be considered to capture potential clients even before assets reach threshold requirements.
  • To manage costs: 73% of business leaders surveyed in the PwC Global FinTech Survey 2016 see cost reduction as the key opportunity provided by FinTech. 3 Administration, operational and back office activities will need to be lifted and shifted to digital platforms that allow wealth managers to compete with ultra-efficient, standalone FinTech firms that are not hindered by legacy technology and systems. In many cases, partnerships will need to be formed with third-party providers so these systems can be delivered swiftly without the massive investment required to build proprietary technology.

“The average client is becoming more tech-savvy, so as the next generation comes in it will be increasingly important for advisors to fulfil their digital expectations.”

Relationship manager, Europe

Strategic partnerships – the key to delivery

The possibilities of digital in wealth management will only be realised if it is not treated as a bolt-on to business as usual. Instead it has to involve a fundamental shift in business strategy that seeks to embed digitally-driven efficiency and insight into every stage of activity from prospecting for new clients to servicing existing ones.

But this should not mean starting from scratch. As one CEO notes (see below) FinTech innovators who present the biggest threat to wealth managers also offer the greatest opportunity for strategic partnerships. For many firms, such link-ups will be the only way that technological solutions can be delivered at the speed the market now expects.

The result of such partnerships could be solutions that combine the very best of technological and human capital. Firms that successfully use technology to facilitate and scale up the personal, goal-oriented service for which wealth management is valued – rather than compromise or replace it – will be the industry’s winners.

“I think that we need to dust off the strategic plan and move a lot of things forward. Even with the current generation of clients, the direction they’re going is pulling forward what we thought our technology needed much faster than expected.”

Relationship manager, North America

Conversely, those wealth management firms that cling on to business as usual, focusing on manual operations, pure investment management and siloed client data, should get ready to see market share diminish at an increasing pace over the next five to ten years.

Innovator Insight: Collaboration not competition

“You can’t go to a single boardroom across the world where the impacts of technology aren’t being at least discussed. Financial institutions are becoming more aware that partnering with some of those more innovative, fast-moving companies is actually going to get us to a better solution and faster compared to competitors who have chosen other paths. One thing that’s happening is you’re seeing more and more big companies partner with technology companies and start-ups and things like that, and I think that will help accelerate the pace of innovation.

“Many firms will overestimate their ability to reinvent themselves and bring in those capabilities. Companies that are actually more open to partnering and working with providers, they may actually see a lot more innovation and disruption and modernisation of their offering by piggybacking off the work of others, as opposed to trying to do it themselves or copy or replicate.”

—Mike Sha, CEO of SigFig

“I think a lot of advisors would be really impressed at the efficiency that they can bring to their firm by really utilising technology... For me, almost all of them should be partnering, and adopting other people’s technology [to] give advisors the tools to do what they do best, even better... Advising will only continue to get more personalised, more efficient, more optimised. I think that is how they should approach it.”

—Joe Ziemer, Betterment

1PwC Global FinTech Survey 2016.

3PwC Global FinTech Survey 2016.