Wealth management clients prepared to pay more for personalised service, says EY survey

Over half (53 per cent) of wealth management clients are willing to pay more for personalised service, according to the 2021 EY Global Wealth Research Report. 

In exchange for greater personalisation, the majority of wealth management clients (71 per cent) are willing to share personal data with their primary wealth manager, a higher proportion than those willing to share with doctors, retailers, technology firms and media platforms. As a result of the Covid-19 pandemic, however, 36 per cent of respondents expect the relationship with their wealth manager or advisor to become less personal from a human interaction perspective.

Based on a detailed survey of 2,500 wealth management clients in 21 geographies, the 2021 EY Global Wealth Research Report uncovers what investors value in their wealth management relationships and how it changes across service models, engagement choices and value-aligned advice.

A majority (87 per cent) of respondents are aware of trading and product fees, yet 42 per cent remain concerned about hidden costs when working with their wealth manager, suggesting there is scope to improve transparency and education. 

Wealth management clients want to change the way they pay for specific wealth and investment services. For discretionary investment management, there is growing preference for performance-based fees, which create a stronger perception of alignment between charges and value creation. However, for basic wealth offerings like standard investment products and trading transaction services, an increasing proportion of respondents expect to receive them at no cost by 2024.

Mike Lee, EY Global Wealth & Asset Management Leader, says: “Perceptions around value for wealth management products and services are rapidly changing. With basic investment products and services becoming available at very low costs, experiential factors will become the key drivers of pricing in wealth management. Leading firms will provide curated interaction points, allowing clients to enter the advisor-digital spectrum at their choosing and customize communications according to their evolving needs.”

Beyond purely financial outcomes, the research finds that wealth management clients are looking to build purposeful investment portfolios and wealth relationships. Worldwide, a majority (78 per cent) of respondents have personal sustainability goals, yet 41 per cent feel their wealth manager falls short in understanding their values. At the same time, awareness of specific environmental, social and governance (ESG) themes has increased over the past year.

In light of this, a major reallocation of investments could be in the cards – with 76 per cent of respondents believing it is important to consider ESG parameters in their portfolios and impact investing is expected to grow 15 per cent by 2024, reaching an average adoption level of 35 per cent.

Alex Birkin, EY EMEIA Wealth & Asset Management Leader, says: “Managers should offer end-to-end ESG investing journeys underpinned by a broad choice of ESG investing options, tailored guidance and advice, flexible educational options, supplemental research on important topics and clear accountability that ladders to their wider sustainability strategies.”

According to the research, nearly half of those surveyed (49 per cent) want to consolidate all their financial relationships in one place – across private banking, wealth, insurance and investment services – but 78 per cent of those who would like to consolidate have yet to choose a sole provider. Even among investors who prefer multiple financial providers, 25 per cent say they would pay more to access a consolidated view of their investment portfolios, pointing to a greater need to deliver an ecosystem of financial services.

One deciding factor in provider choice will be a firm’s diversity and inclusion (D&I) practices. Wealth management clients surveyed increasingly view D&I as a sustainability goal and a key driver of provider choice with 48 per cent seeing D&I efforts as important when evaluating a wealth manager. This rises among millennials (67 per cent), the ultra-wealthy (70 per cent) and in markets such as China (68 per cent), India (71 per cent), Italy (71 per cent) and Norway (73 per cent).

Firms that fail to demonstrate empathy will risk losing a significant proportion of their clients, even as the wealth of women and other under-represented groups is growing.

The research finds that wealth management providers must do more to enhance their understanding and support of traditionally under-served groups. For example, 54 per cent of LGBTQ clients believe wealth providers could do more to understand their sustainability goals, compared with just 35 per cent of heterosexual clients. Meanwhile, only 21 per cent of those who identified themselves as white North Americans feel ill-prepared to meet their financial goals, but this figure rises to 40 per cent among those who identified themselves as Hispanic North Americans and 41 per cent of those who identified themselves as Asian-Americans.

Nalika Nanayakkara, EY Americas Wealth & Asset Management Consulting Leader, says: “Wealth managers able to offer niche investments, bespoke advice or customized protection will become increasingly popular as global demand for more holistic approaches to wealth management rises. The key to achieving this is through collaboration with other providers, from health insurers to competitors, in order to deliver an ecosystem for clients. This will have profound implications for wealth managers, who will need to decide between becoming a one-stop shop or a specialist provider.”