The past two years have seen a rapid transformation of how financial advice is delivered and received. Technological advancements and the democratization of financial advice have shifted how the financial industry delivers its services and how clients expect to be served.
A new survey report by professional services firm Accenture reveals that clients now expect a “hybrid advice experience” that seamlessly integrates digital, virtual, and human interactions together. The report shows that while many clients are satisfied with current advice offerings, there is a significant portion who feel the advice they receive is too generic and believe they can do a better job investing their money on their own.
People are tired of generic advice
The survey revealed that almost 90% of mid-level High Net Worth Investors (HNWI) – those with $10 million or more in personal wealth – felt the advice provided to them was “too generic,” against the 55% of the general population surveyed who said they felt the same. A majority of the general population (55%) surveyed also believe they could generate higher returns net of fees by making investment decisions themselves.
This indicates both problems and opportunities for wealth management professionals. There is a clear problem in the HNWI demographic, where the overwhelming majority feel they are simply not getting their money’s worth when it comes to financial guidance. This has been a longstanding problem within the wealth management industry, where advisors often deliver safe, middle-of-the-road advice to prevent over-promising to clients and to keep compliance officers satisfied. Further, as access to financial information has increased and technology has empowered retail investors, it is unsurprising that clients are disappointed when their advisors simply do not deliver the high-value financial advice they feel entitled to as a result of the fees they pay – which can quickly become exorbitant for HNWIs.
The study reveals ample opportunity for the wealth management industry to improve its delivery of services. Clients have voiced a clear concern that advisors can readily remedy. Advisors will need to give more customized options and advice to their clients if they wish to hold onto the traditional client relationships to which they have become accustomed. As the survey shows, clients increasingly want tailored, personal advice and digital components together.
Clients still value advisors
Trust is a critical component of the client-advisor relationship, and the survey found that 71% of clients want to engage with an advisor whose values and political leanings are aligned with their own. In addition, 69% of clients want an advisor who interacts with and considers input from their spouses. These findings underscore the importance of building valuable relationships, but also demonstrate that clients overwhelmingly still value having a relationship with advisors rather than managing their money on their own or using AI/robo-advisors.
Across all age groups, there is a growing expectation that advisors offer a diverge range of products and services. For example, 79% of all investors and 91% of Millennials expect their advisor to offer both banking and insurance products. This follows a recent trend in the industry, where banks and other brokerages are becoming one-stop-shops that offer clients a multitude of services in one location from one company. One common example is a bank that offers traditional banking services as well as brokerage, retirement, and insurance advice via advisors who work alongside bankers in the same branch.
Technology is a key enabler in the new state of advice, as it allows advisors to access and analyze vast amounts of data and providing insights that can help predict potential problems in a client’s portfolio or respond to significant life events. Interestingly though, just 17% of respondents prefer a completely digital means of receiving and processing financial advice, while the same percentage prefers a completely personal engagement model. The majority is looking for a blend of both, seeking self-service options when they want them and personal interaction when they feel they need it.
The impact of the pandemic on client financial goals has also been significant, and many clients are now more focused on saving and investing for the future, with 68% of respondents selecting this as a top financial goal. This shift in priorities has implications for advisors, who must be prepared to offer guidance that aligns with these new objectives.
Despite these challenges, the wealth management industry is poised for growth. The intergenerational transfer of wealth is expected to lead to a significant amount of money changing hands in the coming years. However, this also presents a risk to advisors, as nearly one-third of respondents indicated they would leave their current advisor upon receiving a large sum of money. This, in addition to the responses that showed the majority of clients feel the advice they receive from their advisors is not valuable enough and too generic, suggests that advisors must continually demonstrate their value and adapt to the changing needs of their clients if they wish to keep them.
Overall, the new state of advice represents a paradigm shift in wealth management. It requires advisors to be more client-centric, technologically savvy, and proactive in their approach. By embracing these changes and leveraging the power of data and technology, wealth managers can deliver holistic offerings that meet the evolving needs of their clients. As the industry continues to evolve, the new state of advice will be defined by those who can adapt, innovate, and put the client at the center of everything they do.
