Digital entrants increase competition for mass affluent individuals, says GlobalData
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, says GlobalData, a leading data and analytics company.
Sergel Woldemichael, Wealth Management Analyst at GlobalData, comments: “As highlighted by GlobalData’s 2021 Financial Services Consumer Survey, mass affluent individuals’ propensity to opt for alternative providers to manage their wealth is rising. In Asia Pacific, for example, only 27 per cent 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.
“In both Europe and the Americas, traditional banks, brokers, and financial advisors are preferred by most mass affluent individuals. However, other options – from digital-only banks to new digital financial services providers – are certainly growing in popularity.”
Woldemichael continues: “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.”
As of late though, traditional players are beginning to act on growing mass affluent demand for digital services. In June 2021, JP Morgan purchased the UK’s leading robo-advisor by assets under management, 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 personalisation of its Global Wealth and Personal Banking business. So, some players are certainly spreading their wings and looking at non-traditional financial services platforms to promote longevity.
Woldemichael concludes: “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. All in all, 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.”