Shifting client demographics and preferences, as well as a flood of new digital offerings, are driving clients around the world to reconsider their wealth management relationships.
According to our recent global research study of wealth management clients, one-third of clients have switched providers or moved assets in the past three years and another third plan to do so in the next three years. These shifts are happening across client wealth levels and demographic profiles.
Clients are identifying specific providers to fill certain needs, using five different types on average. They are switching for value - most often at critical life moments and as the complexity of their financial lives evolves. Firms who can best create this value will be best-positioned to retain their current clients and acquire competitors' clients who are planning to move.
Who is switching?
Our research shows that the wealthiest clients are the most likely to change their financial relationships: 39% of ultra-high-net-worth (UHNW) clients say they plan to switch or move money from a wealth management provider in the next three years, compared with just over one-quarter of high-net-worth (HNW) and just under a third of mass affluent clients. This is expected, as UHNW clients are most likely to diversify their assets among a greater number of wealth management providers.
The most profitable and highest potential clients are the least loyal and most likely to switch
Firms face increased pressure to demonstrate value to younger generations, who represent the future of their businesses. Though wealth levels generally increase with age, the proportion of clients planning to switch decreases with age: boomers are 29% less likely to switch than millennials.
Wealth management providers have an opportunity to build trust and demonstrate the value of their services by providing education through thought leadership and financial coaching. Our research found that clients who self-identify as having high investment knowledge are significantly less likely to switch over the next three years compared with those with low investment knowledge (only 19% of clients with high investment knowledge plan to switch, compared with 36% of clients with low investment knowledge).
The desire to move assets is varied across regions. Encouraging results in the Americas and Europe show fewer clients planning to switch providers in the next three years than have done so over the last three.
Banking and wealth relationships in Asia-Pacific are in a period of change, particularly in China, where new, emerging digital methods and habits are being driven by fresh digital solutions. The percentage of clients expecting to transfer assets is expected to more than double in this region, from 15% over the last three years to 34% in the next three. The intensified competition among incumbents and new entrants presents clients with a multitude of options for wealth management providers, heightening the pressure on firms to continuously raise the bar for satisfying client demands.
A renewed focus on retention in the US and EMEA is starting to pay off, but plans to move assets in APAC and Africa are rising.