Wealth clients consider switching amid complex investment needs

Over half of wealth management clients in Asia-Pacific are looking for more advice in investment and financial planning services, according to EY, as market volatility increases the complexity of their investment needs.

The firm’s 2023 Global Wealth Management Research Report surveyed 2,600 clients in 27 geographies and found some 42 per cent of Asia-Pacific clients said their investment needs have gotten more complex over the last two years, especially for those investors in the very high and ultra high net worth demographics. 

As a result, 42 per cent said they have sought additional advice in response to the market volatility, 33 per cent are keen to add new adviser relationships, and over half are looking for more advice in investment services or financial planning services.

Use of independent financial advisers is also expected to increase from 20 per cent in 2021 to 27 per cent, while usage of alternative investment firms or full-service institutions is set to decline.

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However, this need for more information is prompting clients to consider the different providers they use, with 57 per cent of wealth management clients in the Asia-Pacific region expecting to either move assets, add new providers, or switch outright during the period by the end of 2025.

This is significantly higher than clients in the US where only 25 per cent are planning to switch and the global average of 44 per cent.

It is not necessarily the case that money will be moved between different wealth managers either as fintech firms are expected to be the biggest beneficiaries on a relative basis compared to other providers. In 2021, fintechs such as robo-advisors were used by only 8 per cent of clients, but EY forecast this could rise to 18 per cent in the next three years.

“Far from consolidating their assets in search of simplicity, clients are becoming more inclined to shop around in search of the expert advice and support they need to make sense of a challenging environment,” EY said.

“Volatility and complexity seems to be encouraging clients to seek out more providers and support in order to access the capabilities they need.

“The dominant theme is not outright switching but an increasing desire to spread assets between multiple providers. The research shows an anticipated increase of 12 per cent in the average number of providers that clients expect to work with over the next three years.”

Client retention

As to how wealth managers can retain clients in this turbulent period, EY said it will be important for them to focus on offering their clients tailored engagement and advice and differentiated levels of personalisation at the same time as reducing costs to serve.

This could include moving away from a “sole provider” strategy, reinventing business models, harnessing AI for efficiencies, optimising the ability to capture new clients and offering different bespoke services for clients’ life stages.

“Firms will come under increasing pressure to deliver best-in-class client experiences – while, at the same time, being pushed to reduce per-client costs by wallet share erosion. In response, wealth managers need to sharpen their ability to provide personalised engagement, more frequently.

“Traditional in-person interactions and digital experiences remain important, but responding to clients’ openness to engage virtually will increasingly become a differentiator. They must be ready to seize the opportunities provided by this moment of flux – whether by acting as their clients’ primary provider or perhaps by working with other agile players in the wealth management ecosystem to deliver outstanding experiences.”

It also recommended using the market volatility as an opportunity to review and update financial plans to increase client engagement and financial education, even if it results in no necessary portfolio changes. This is particularly the case for Millennials and mass-affluent clients who may be in the early stages of wealth generation and their adviser relationship.

“The greater the market disruption, the greater the need for clients to understand how volatility is affecting their wealth and how product choices can provide new and flexible ways to achieve financial goals.”