A research report on the global wealth management sector by EY highlights trends such as sharply differing views on business health around the world, and a sobering assessment of the effectiveness of social media strategy.

A global survey by EY of 2,000 clients and 60 wealth managers showed half of American firms see margins widening while respondents in Asia and Europe are less upbeat about this trend.

It also shows that many clients using several managers are interested in consolidating these relationships, and also highlights serious shortcomings in use of social media as a channel.

The report, Could Your Clients’ Needs Be Your Competitive Edge?, found that with four out of 10 clients open to the idea of switching wealth managers, there is a $175 billion to $200 billion revenue opportunity for firms that get ahead of their competitors, if based on the assumption that there is about $120 trillion of client assets managed by global wealth managers.

There are headwinds to arriving at the desired destination, however. For example, with fintech and social media creating headlines, the survey also carries the sobering finding that 72 per cent of respondents said their social media strategy is ineffective, and that 48 per cent of them said the reason for this failing is a “poorly articulated strategy”.

Among other findings, firms in Europe and the Americas are more optimistic about directing their strategic budgets towards revenue growth compared to other regions. The specific revenue growth initiatives that wealth managers are undertaking are focused on, or have a significant impact on, client experience. Yet, among wealth managers, there is much debate on what a differentiated client experience truly means, the report said.

There is a significant amount of assets in play globally. The vast majority (73 per cent) of wealth management clients have relationships with a number of wealth managers, and 57 per cent of them are open to consolidating this number. This means four out of every 10 clients would consolidate their assets into fewer firms under the right circumstances.

Asked about whether margins are improving or deteriorating, about half of firms in North America and Latin America said they were widening but views are less favourable in Asia (8 per cent) and Europe (11 per cent).

Such a result makes sense in light of how, for example, a number of Western firms, such as Societe Generale and Barclays, have sold Asia-based private banks in recent times to local competitors, citing a failure to reach sufficient scale and a need to cut costs. In Europe, such as in Switzerland and Luxembourg, a number of M&A deals have taken place, often driven by costs.

More than 75 per cent of respondents to the EY survey said the cost of regulatory compliance was the main cause of declining margins, followed by competitive fee pressure (64 per cent) and macroeconomic conditions (52 per cent). Taking the regional view, regulatory compliance costs were most cited in Europe (selected by 93 per cent of respondents), while APAC highlighted fee pressure as the top factor (88 per cent).

What they want

The survey also found that clients overwhelmingly identified transparency of portfolio performance and fees as the top driver of building trust. “However, clients are pushing the envelope on what transparency means to them and are eager for a new level of public transparency. Clients are eager to rate their advisors and connect with like clients in public forums. Traditional views of transparency are no longer enough,” EY said.

Clients are more demanding about digital access to wealth management and firms that are early adopters of new technology will reap rewards, the survey found. 

When asked what are their top factors for client service experience, 53 per cent of clients in the survey said “digital channels and self-service capabilities”; 47 per cent said “accurate account information”; 46 per cent said “efficient, intuitive processes”; 36 per cent said “quality and frequency of interaction with the advisor”; 31 per cent said “other”, and 30 per cent said “same-day response to emails/calls”.