Wealth managers will be focusing on technology to upgrade the advisor and client experience over the next two to five years, according to new research.

Wealth managers will be focusing on technology to upgrade the advisor and client experience over the next two to five years, according to new research.

Firms already dedicate significant resources to their client services platforms but less than one-third feel their client-related technology is effective, according to a study from Ernst & Young.

The firm spoke to a group of 40 senior executives at wealth firms, each managing billions of assets, in North America and Latin America.

The findings show that, over the next two to five years, these executives want to design and implement segment-specific models that provide different levels of high-quality service to their clients.

This taps into a growing awareness in the industry that service means segmenting customers in such a way as to make them individually profitable, and which allows for consistency within each segment. Schwab Advisor Services, for example, has been running practice management sessions on this topic.

Improving the advisor experience

The Ernst & Young survey shows firms are prioritizing spend on advisors, looking at where they can leverage technology and automation to allow advisors to be more effective, spend more time with clients, and improve their overall book of business.

This would seem to be justified by other research, published last week, which showed that a supportive platform was hugely important to advisor satisfaction with their jobs – and thus key to advisor and client retention.

Increasing face time

Over 75 per cent of the wealth management firms surveyed said that they have initiatives in place to increase face time with clients, as it has become clear that the benefit of adding support resources quickly outweighs the cost.

The survey identified a trend toward enhancing technology, and specifically mobile technology, to free up advisors’ time, with around three-quarters of firms looking to invest in this area with a view to increasing effectiveness. Larger firms are particularly keen to use mobile to deepen client relationships by providing greater access to information, Ernst & Young said.

When it comes to proving information to clients, though, the industry is moving toward making this increasingly client-centric, delegates at a recent conference in New York said. This means addressing the key needs of relevancy, transparency and ease of use in communications.

Meanwhile, demonstrating how wealth managers have been behind the curve when it comes to communications, speaking at the same conference, Alan Hamilton, CEO of Equipos, said the vast majority of clients think electronic communications are the most important form of communications, while the vast majority of wealth managers still see face-to-face as the key to the relationship.

Given this, it is questionable whether, in today’s world, “face time” should be understood literally – or more as a concept.

Ineffective proprietary tools a problem

Proprietary tools dominate in client-related functions, the survey found, with around 80 per cent of firms using proprietary tools, despite 40 per cent of respondents saying their client technology is ineffective.

Assuming the survey is representative, this points to a huge opportunity for technology providers to increase their markets, and also for wealth firms to improve their advisor and client experience through employing best-of-breed technologies.

While the focus is clearly on improving technology for efficiency and business purposes, wealth management firms also indicated that spending on compliance and risk management is strong, with firms allocating around a fifth of their budget to spending in these areas.

Regional differences

The Latin American wealth management market is clearly in a different evolutionary stage to the North American one, Ernst & Young pointed out. However, socioeconomic changes in the region provide an opportunity for wealth managers, so long as they can overcome challenges due to limited scale.

Less scale in areas such as trading support and trade order management mean wealth firms in Latin America spend relatively more on these, leaving less scope for investing in areas like client service and investment management capabilities, the survey found.

“While North American firms are focused on improving the client and advisor experience, Latin American wealth managers are focusing more on new product and new market growth,” Ernst & Young said.