As the historically paper-based wealth management industry undergoes a long-awaited digital transformation, mass affluent customers are now open to a wider range of providers managing their investments. Traditional players must step up their digital services or lose out on this underserved investor segment.
Citing GlobalData’s 2021 Financial Services Consumer Survey, Sergel Woldemichael, wealth management analyst observed that mass affluent individuals’ propensity to opt for alternative providers to manage their wealth is rising.
In Asia-Pacific, for example, only 27% of respondents prefer to use traditional banks and building societies to manage new investments. The lion’s share would rather have digital players such as robo-advisors and big tech companies manage their wealth.
“Granted, many banks have the luxury of a large client pool, and some have decades-old, dedicated mass affluent services. Yet, they can no longer rest on their prior success with this group going forward. Digital players are providing sought-after customer experiences at pace, with big tech companies priding themselves on personalisation, and digital investment platforms providing automation and continuous service expansion at a low cost.” Woldemichael continued.
Traditional players are beginning to act on growing mass affluent demand for digital services. In June 2021, JP Morgan purchased the UK robo-advisor Nutmeg for its forthcoming mass affluent service.
Barclays collaborated with Scalable Capital on a robo-adviser in 2020 and HSBC partnered with Amazon to deepen the personalisation of its Global Wealth and Personal Banking business. Some players are certainly spreading their wings and looking at non-traditional financial services platforms to promote longevity, but more need to embrace this trend.
“Competition for the mass affluent demographic will continue to grow in the wealth management industry as new digital entrants and non-financial services providers make their mark. The COVID-19 pandemic is to blame for the acceleration of this, spurring digital uptake. Only the strong will survive – and in this case, ‘strong’ refers to those that can best cater to the mass affluent audience and meet their increasingly demanding digital needs,” Woldemichael concluded.
