Four forces shaping the future of wealth advice

This is a co-authored blog with my colleague Jan Bellens, EY Global Banking and Capital Markets Leader.

Advice on people’s money is a hot topic at any given time but with the lingering effects of the pandemic, the severe geo-political disruption and rapid growth of inflation, it feels like a particularly burning issue. At EY, we have been examining the future of wealth advice for some time. ?With heightened uncertainty, increasing investment options and rapid technology advancements, the appetite for robust wealth advice is greater than ever. Getting wealth advice right, combining technology and innovation with humans at the center, is a tremendous growth opportunity for Wealth and Private Banks (WPBs).?

In our latest thinking, we outline our vision for the future of advice, incorporating insights from ultra-high net worth (UHNW) and high net worth (HNW) clients and in consultation with our banking and wealth and asset management teams across the globe.

We hope WPB leaders will find the insights both compelling and useful as they rethink their operating models, tech environments and cultures in pursuit of new opportunities to create value. This article recaps the key messages and shares a few recommendations for moving forward.?

Four forces shaping the future of advice

1. The disruption of current client expectations: As many WPBs serve multiple client segments, they need a rich and detailed understanding of the needs of their unique segments. There is a clear trend away from traditional segmentation based purely on wealth and asset levels and toward more nuanced views, such as professional experiences and psychographic personality profiles. Firms must ensure they have the capabilities to monitor the evolution of consumer needs over time, because that will be necessary to deliver on the promise of individualized experiences.?

2. The democratization of advice across the wealth spectrum: The rising demand for sophisticated products and services among mass affluent and HNW clients will be the biggest disruption to existing WPB models over the next few years. These segments are expected to grow 40% between 2020 and 2025, according to Knight Frank. To seize the opportunity, WPBs must enhance existing product portfolios with more advanced offerings, including direct indexing, private assets, digital assets and tokenization. Holistic wealth planning will become an expected component of advice models.?

3. Integration of people and technology: As digital channels continue to proliferate as the main source to deliver advice, WPBs have a unique opportunity to boost efficiency and satisfaction at the same time. In fact, advisor-led channels will soon account for less than 50% of client interactions, according to the EY 2021 Global Wealth Research Report. Still, human advisors will remain vital, so firms must master hybrid models, by providing high-value, omni-channel advice in real time.?

4. The use of data and technology to generate advice: The industry has made significant strides in digitizing the delivery of advice, but huge potential remains to effectively harness data and technology. According to EY research, clients (especially millennials and those in Asia-Pacific) are ready for digital investment tools such as automated portfolio rebalancing after market changes or key life events. Large and growing pools of client data, combined with rapid advances in AI, advanced analytics, machine learning, and robotics, give firms the ability to generate proactive, insight-rich advice faster and at greater scale than they do today.??

Moving into the future?

WPBs can’t create the future overnight, but there are steps they can take now to lay the foundations for long-term success, while retaining the flexibility to adapt as the industry and consumer needs evolve.

The key first steps include:?

• Identifying the future model to deliver ever-improving client experiences based on a strong strategic framework, integration with wider ecosystems, and a robust, flexible service architecture. The strategy starts with a compelling vision for the future organization, clear plans to achieve it and a well-defined business case. Ecosystem compatibility is key, given that advice will increasingly be delivered through ecosystems involving multiple partners. The service architecture brings the vision and strategy to life via client interactions.
• Scoping out the technology investments, prioritizing systems and tools that enhance client experience, as well as boost operational efficiency. Platform integration and product diversification should also be factored into technology budgets. Industry research shows that firms have identified robo-advice, instant messaging, automated on-boarding and customized reporting as near-term priorities. To realize full technology ROI, larger firms will need to navigate the constraints of their legacy tech.?
• Shifting the culture and mindset. This is a challenging but worthwhile task, given that transformative change requires faster decision-making, more creative thinking and greater organizational agility. WPBs must ensure they bring their advisors along on the journey, simultaneously upskilling them to ensure their buy-in and adoption of digital advice channels and tools. Engaging new talent can help drive change and promote the behaviors that WPBs need to embrace while also motivating current employees to embrace the new culture. The EY CEO Imperative Study shows that firms have a way to go; only a third of financial services CEOs believe their organization has embraced a culture of continuous transformation. Building such a culture is critical to shaping –?and winning –?the future of advice.??

That’s why now is the time for the industry to start moving to new models that will better serve evolving consumer needs and meet rising expectations.?

Again, we hope you’ll read the full report for more detailed insights and recommendations on the future of wealth advice. And we’d be delighted to hear from you with comments or questions; feel free to reach out anytime.

The views reflected in this article are the views of the author(s) and do not necessarily reflect the views of the global EY organization or its member firms.