- The flexibility and ubiquity of the internet offers a host of digital marketing opportunities for luxury wealth management firms to more efficiently and accessibly reach their high-net-worth client base.
- The development of automated advisory services and data analytics platforms can equally help wealth managers to cut costs and more accurately target their marketing efforts.
- The luxury wealth management industry has been slow to embrace advances in technology, lagging behind other financial service providers.
- Older, more traditional investors remain distrustful of automated services and prefer to interact face-to-face with their advisor.
- Younger consumers continue to be distrustful of financial professionals as a result of the 2008 financial crisis.
- Build consumer trust by creating an authoritative and informative online presence through reliable content.
- Establish an effective and appropriate means of collecting and analysing client data so that luxury services can be marketed more accurately.
- Creating hybrid high-end services that combine the accessibility of online advisory services with the tailored service of traditional wealth management firms.
Technology has been a disrupting influence in the luxury financial services industry for many years, and now, as computing power accelerates exponentially, the adoption of technologies such as cloud computing, artificial intelligence, and voice recognition will continue to shape the way we manage our finances. Certain digital services and automation have already become the norm within the retail banking industry, with high-net-worth consumers expecting to be able to make payments digitally, access their bank statements online, and seek guidance through their web browser or smartphone. These rising expectations of accessibility have made it necessary for financial service providers to innovate or risk being left behind.
This digital evolution has seen a swathe of technology-backed start-ups emerge in recent years, seeking to reimagine the way we interact with our money across all areas of the financial services industry. Despite being slower to exploit these improvements in technology, the luxury wealth management sector is increasingly being disrupted by firms offering a fully online experience, or a more balanced hybrid service. Notably, so-called ‘robo-advisors’ such as WealthFront and Betterment, that provide a largely automated service are driving an interest in digital passive investing, with Deloitte predicting that the robo-advice industry could hold as much as $7 trillion US assets under management by 2025.
However, it is not only in the provision of luxury services that wealth management firms are embracing the technology revolution. The online demands of a growing affluent millennial client base have seen wealth managers adopt luxury digital marketing strategies to reach high-net-worth consumers, target their services effectively, track consumer behaviours, and analyse client data. This digital shift is expected to continue, with a 2014 Global HNW Insights Survey finding that 64.2% of high-net-worth individuals worldwide expect their future wealth management relationships to be managed primarily or entirely online. As such, the employment of effective digital marketing strategies will increasingly be a key factor in the retention and attraction of wealth management clients.
Wealth Managers adapting to the re-wired affluent Millennial investors
The clientele of wealth managers is getting younger. Millennial luxury investors are expected to be the largest adult segment by the end of the decade, and luxury firms are actively pursuing the business of so-called HENRYs – high earners not yet rich. The introduction of digital services to the wealth management space has attracted a generation of investors to the market who value the accessibility, efficiency, and cost-effectiveness that technology provides. And in turn, the rise of this new clientele has driven a swell in digital innovation among wealth managers, and an increased adoption of digital strategies in a bid to appeal to younger high-net-worth consumers.
Collectively termed the ‘re-wired investor’, this new breed of client typically comprises younger affluent Generation Z and Millennials, as well as millennial-minded baby boomers, who expect wealth management services to be as accessible and intuitive as the non-financial digital services they use on a daily basis. These clients do not want lengthy in-person meetings with their advisors, or complex investment strategies, instead preferring simple, around-the-clock guidance across multiple online and mobile channels.
The re-wired investor is characterised as being more sceptical than the traditional investor, being more likely to consult multiple sources, including peers, before deciding upon a wealth management strategy, and want products that are tailored to suit their individual needs and circumstances. This ingrained scepticism appears to extend to their perception of risk, which the re-wired investor views as a downside to investment as opposed to a measure of market volatility. According to Deloitte, this has already led advisors to shift their focus to the promotion of strategies that value downside protection at the expense of strategies that emphasise the management of risk through diversification.
The demands of this digital native consumer base have already driven considerable change within the luxury retail banking industry, which has experienced an exodus away from in-branch services in favour of digital and mobile banking platforms, with around 60% of all banking transactions now being completed online. The growing preference for digital transactions has seen a collapse in physical banking infrastructure in developed markets. In the UK alone, more than 1,000 high street bank branches were closed in the two years between 2015 and 2017 as mobile banking became the norm, with HSBC, one of the country’s market-leading institutions, shutting around 27% of its branch network.
Banks have also created innovative luxury digital marketing strategies that support this modified operating model. Bank of America, for example, opened a Pinterest page in 2015 that aims to provide younger customers with useful information on money management, while Barclays launched its Digital Eagles campaign through which it provides downloadable banking content to communities across the UK. A similar growth in digital marketing is underway in the wealth management sector, with 69% of wealth management firms identifying the development of digital services as a top-three priority in the medium-term.
The digitalization of the luxury wealth management pre-purchase experience
For wealth managers, where this transition to digital marketing has become immediately apparent is in the pre-purchase process. Professional advisors are no longer a consumer’s sole, or even preferred, source of information on current investment strategies, with the internet offering an abundance of contemporary content, data, and analysis upon which investors new and old can base their financial choices. This transition from direct interaction with professional advisors was highlighted in a 2016 EY survey, which found that around 59% of wealth management high-net-worth clients believe that websites and mobile channels will be their principal source of information in the next two to three years, compared to just 26% who expected to receive guidance primarily from in-branch representatives.
Wealth managers must now adequately address the two central pre-purchase concerns of the modern wealth management client before interacting directly with high-net-worth consumers: transparency and applicable intelligence.
Simon Beauloye, co-founder and CTO of mOOnshot digital
As explained by Simon Beauloye, co-founder and CTO of mOOnshot digital, the “wide-scale preference for on-demand, digital information – with consumers able to compare the services of competing providers side-by-side through customer reviews, media coverage, and corporate websites – has led to the creation of both a pre-purchase experience that is based almost entirely online, and a client base that is broadly more informed than in previous generations.” In this evolving climate, a wealth manager’s careful curation of their online presence has become a key factor in establishing consumer trust and securing recurring business. To stay competitive, Simon Beauloye continues, “wealth managers must now adequately address the two central pre-purchase concerns of the modern wealth management client before interacting directly with high-net-worth consumers: transparency and applicable intelligence.”
While successful client-advisor relationships have always been based on trust, among the burgeoning population of affluent millennial investors – whose perception of the financial industry remains skewed by events leading up to the 2008 financial crash – more than ever that trust must be earned. Today, trust is largely synonymous with transparency, which the majority of consumers prioritise over personal interaction with advisors. This is true particularly with regard to fees, which to many investors remain a mystery – according to the above-mentioned EY survey, around a quarter of current wealth management clients are still unaware of how they are being charged. A simple way then for wealth managers to establish a basis of trust is by offering an honest and accessible explanation of their fee structure to potential clients online, while more forward-thinking firms can go further by encouraging open discourse through social media and online community forums.
The reliable and honest provision of information is not only a matter of transparency, however. With consumers favouring online and mobile channels as their principal source of information, the pre-purchase experience also presents an unprecedented opportunity for luxury investment firms to establish themselves as reliable providers of quality content and effective, actionable advice. Used intelligently, these digital information channels, which can be curated and controlled in-house, can both satisfy a consumer desire for transparency and go some way to establishing individual firms as reliable and authoritative sources of information on developments in the wealth management industry as a whole.
Content and the fall of the wealth management salesman
The ubiquity of the internet has seen wealth managers turning more and more frequently to online and mobile channels as a means of attracting, engaging, and converting clients at the expense of traditional salesmen, whose role in the pre-purchase process has diminished significantly in recent years. At its most basic, the process of delivering digital content begins with the creation of compelling, informative reporting, either through a blog or through more detailed papers that can be shared online. Major wealth management groups such as BlackRock, UBS, and State Street regularly publish online content that cements their names in the minds of clients as industry experts.
The primary method of delivery for digital marketing content remains the corporate website, which has become a staple across most of the financial services industry, serving as a centralised repository for branded media and marketing. However, several prominent wealth managers have developed more innovative ways of using their websites to offer guidance and promote their services than through a simple blog. Goldman Sachs, for example, publishes a series of videos and interviews, while JP Morgan releases a regular audio podcast. Other firms choose to share infographics that display market trends or offer regular investment tips to clients. These online methods are effective in capturing current investment concerns and trends and can be delivered directly to the screens of consumers.
While the corporate website continues to be a key marketing tool, consumers now expect to be able to access relevant content across multiple channels. Firms are increasingly recognising that consumers have moved much of their life online, spending a substantive portion of time using smartphone apps and browsing social media, and are adjusting their marketing efforts to enhance their presence in these areas. McKinsey reports that the mobile interaction share, currently at around 35%, is the fastest growing channel across all financial services, while a recent study by Assetinum found that in Europe more than 40 percent of high-net-worth individuals under 50 view social media as an important channel for communicating with their bank. By exploiting these channels through the development of mobile apps and the creation of accounts with platforms like Facebook, Twitter, and LinkedIn, high-net-worth finance firms are able to insert their brand and expertise into the day-to-day interactions of their clients, reinforcing their standing as trusted industry experts.
Wealth management providers have also begun to embrace the relatively nascent trend of native advertising, creating branded content that is published by and in the style of third-party content providers with which consumers have an existing relationship. Merrill lynch, for example, ran a piece with cbssports.com in 2016 that redirected to a branded article on the costs of a destination wedding, while JP Morgan previously used a BuzzFeed spot to promote its Freedom Unlimited card. The goal of these articles, as before, is to cement a brand identity into the ecosystem of a consumer and build trust among a target client base.
Analytics, data, and personalization are needed to engage high-net-worth Millennial investors
A by-product of consumers having moved a significant portion of their lives to the cloud has been the creation of enormous amounts of digital data, with every social media interaction, browser click, and mobile download producing a digital footprint. Online interactions with boutique wealth management firms similarly produce data, and tech-savvy firms are already seeking innovative ways that they can use this data to identify trends, patterns, and relationships that help them more accurately deploy their marketing efforts.
Big data has already driven wide-scale change in the way businesses monitor consumer behaviours across multiple industries, from retailers to healthcare providers. Simon Beauloye expects wealth managers to employ predictive, algorithmic analytics systems in much the same way as a means of accurately assessing the investment style, lifetime value, and risk tolerance of both existing and potential clients. The insights gained from this analysis can be coupled with automated email marketing or mobile applications in order to promote appropriate products and services to client sub-groups.
This abundance of data and the increasing sophistication of modern computing has also sparked the rise of digital wealth managers, or so-called ‘robo-advisors’, online platforms that provide automated financial and portfolio management advice to consumers online. And while older investors have been reluctant to put their trust in automated platforms like WealthFront and Betterment, the growing pool of digital native wealth management clients are more open to such services. According to a 2016 survey conducted by asset manager Legg Mason, which polled over than 1,000 investors between the ages of 18 and 39 years of age, 85% of respondents said they were comfortable receiving automated advice.
In conclusion: Digital at the service of premium wealth managers
The digital revolution is set to continue within the wealth management sector, following on the heels of changes already made to the retail banking sector. Automation will continue to be developed as an effective customer service tool, and luxury firms will transfer more and more of their brand marketing content online as they seek to cater to a younger high-net-worth investor audience. Mainstream wealth managers such as Switzerland’s Julius Baer are ahead of the curve in this respect, providing multi-channel content and interactive platforms targeted specifically at affluent millennial clients.
Staying up to date with advances in technology will continue to be important for firms that wish to retain a competitive edge, with the wealth management industry likely to follow new trends in digital marketing that take advantage of augmented reality, virtual reality, and live streaming. The sector, however, already has catching up to do, with these new developments expected to be years away from effective deployment.
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- HSBC closes a quarter of high street bank branches in two years. Ben Chapman, 14 December 2016, The Independent.
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- UK millennials embrace robo-advice more than global peers. Imogen Conyers, 2016, Legg Mason Global Investment Survey.