The wealth management industry is looking to diversify. No, not in terms of their portfolio of investments. Rather, they are seeking to expand beyond the current pool of customers they typically provide services to.
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That’s according to the Deloitte-sponsored ThoughtLab report Building a Future-Ready Investment Firm, which surveyed 2,000 investors and 250 investment providers about the future of wealth management. So what do these new customers look like? There’s a range of options—from younger generations to emerging markets. But one thing is clear: technology will play a major role in accessing these new customers, understanding their needs, and tailoring offerings accordingly.
The changing face of investors
According to the survey, in the next three years, 63% of investment and wealth management firms plan to expand in their main client segment, while only 32% plan to deepen their share of wallet with existing clients. That means wealth managers are actively identifying new niches of customers to explore, with the following categories standing out:
- Younger generations: It is estimated that more than $15 trillion in wealth will transfer from older generations to younger ones by 2030. While this new pool of customers seems a natural target for wealth managers, they’ll need to first understand and adapt to the unique investing behaviors of a younger crowd.
- “Mass market”: While many firms are looking to expand up-market to high-net worth customers, a few forward-looking segments are seeking out customers with less wealth or the “mass market.” This includes robo-advisors—automated financial advisors—online platforms, and the wealth advisory divisions of large universal and investment banks. For these businesses, the share seeking to go down-market is twice the average for wealth management businesses overall.
- Cross-border: Global wealth is projected to increase by 38% by 2027, thanks partly to the rise of emerging-market investors. As such, more and more investment firms are looking to find customers outside of their domestic markets. Nearly 40% are planning to expand across borders over the next three years.
- Women: If women invested at the same rate as men there would be an extra US$3.22 trillion of assets under management. But only 30% of firms said they will focus on women over the next three years. This strategy is leaving out half of the population–which currently controls over a third of the world’s wealth. Firms should stand up and take notice of this influential client segment.
Tech as a deciding factor
Although to varying degrees, technology will play a critical role in attracting most if not all of the above pools of potential customers. Making the most of digital tools is one of the most accessible ways for investment firms to access these new demographics as is the use of data and new AI-powered applications.
Naturally, the younger generation, as digital natives, is the group most keen to see investment firms providing digital tools—and those that not only help facilitate their transactions but also allow them more autonomy over their investments. As the report found, among Gen Y and Z, 74% expect their wealth managers to offer digital experiences on par with leading digital companies. More than 60% want better digital tools so they can manage their investments directly, and 52% say they want access to AI-enabled chatbots to answer queries. Right now, robo-advisors have been successful at catering to these demands—and other investment businesses may need to catch up.
To attract mass market and non-domestic customers, wealth managers will also need to step up their technology game, making use of data analytics to personalize services for these markets. That means capitalizing on data about investor behaviors and trading patterns as well as seeking out external open-source data from social media.
With the goal of building strong relationships early on with investors, many large institutions have already started using digital tools to offer hybrid advice—which combines the best of human-based financial advice with digital advice—and other digital techniques to engage with the mass market. And for some countries, according to the report, more than 50% of those surveyed said digital applications, channels, tools, and platforms were key to their selection of wealth manager.
Wealth solutions tailored to the unique needs of women should also be a priority—and advancements in technology can help here, too. Right now, the lack of female advisors—only around 30% of all advisors in the US—can be an obstacle to serving female customers: one survey found that 70% of women seeking a financial adviser would prefer to work with a woman. Now with the dawn of hybrid working models enabled by technology, the profession could be more attractive: according to Deloitte’s Women @ Work 2023: A Global Outlook survey, two-thirds of women planned to stay for more than three years at a job when they had work flexibility.
People first
Ultimately, understanding the customer is about more than just data, demographics, and digital tools. But these are critical means to an end: that is, providing the best and most personalized investment experience. With that as their North Star, wealth managers should be able to use technology as a defining factor in their quest to attract the next life-long client.
To learn more about the future of wealth management, read Building a Future-Ready Investment Firm or check out our banking & capital markets page on Deloitte.com.
