Closing the gap - EY - United States_2014... · on client acquisition and retention, yet it’s the most ... Closing the gap: 2014 Wealth Management Survey | 3 Methodology and respondent

Closing the gap2014 Wealth Management SurveyA comparative view of financial advisors’ and clients’ perceptions, preferences and priorities

1Closing the gap: 2014 Wealth Management Survey |

ContentsForeword 02

Methodology and respondent profile 03

Trends influencing the industry 05

Key drivers across the client life cycle 13

Service channels today and in the future 19

Latin America 27

Conclusion 35

EY contacts 37

2

ForewordEY is proud to release its third annual Wealth Management Survey. This survey encompasses the views of both financial advisors and wealth management clients across the Americas and represents a variety of age and wealth segments. While our past two surveys focused on developing a deeper understanding of the views of wealth management firms on topics like product and client strategies and technology and operations priorities, this year we decided to turn to the two key constituencies that firms cater to: clients and advisors. Our goal was to understand their views on key trends driving the industry and important elements driving their relationship across the client life cycle. In this context, the survey identified the following core themes:

1. Clients and advisors both cite holistic goal planning and wealth transfer as two of the most relevant trends driving the industry. However, our survey also suggests that wealth managers have yet to implement effective strategies to capitalize on these trends.

For one, holistic goal planning has a fairly limited impact on client acquisition and retention, yet it’s the most important trend influencing clients’ decisions to seek out wealth management firms. This suggests that clients see little differentiation across firms’ planning approaches and are not fully aware of the benefits of their current firm’s planning offering. Capitalizing on the client desire for goal planning requires not just a differentiated offering that attracts clients but one that communicates the value proposition to clients across the life cycle.

In terms of wealth transfer, advisors and clients both view this as an attrition driver, suggesting firms still have work

to do to realize the opportunity, or mitigate the risk, posed by generational wealth transfers.

2. After several years of focusing on wealth preservation post-2008, portfolio performance has become top of mind for clients and advisors. Both clients and advisors rank portfolio performance as the top factor driving client retention and attrition. This presents a unique challenge for wealth managers who are currently working to shift the focus of the client conversation from performance benchmarks to individual goals. Firms will be well-positioned to realize the benefits of holistic goals-based planning if they appreciate the magnitude and complexity of the required cultural shift and implement strategies to address the change in client mind-sets.

3. Key client behavior drivers beyond the strength of the client-advisor relationship, which are often overlooked by advisors, can be leveraged to improve client acquisition and retention. In general, advisors tend to overestimate the importance of their relationships with clients (although it’s still a primary factor) while underestimating the relevance of firm reputation and segment-specific strategies. Advisors also need to better understand the subtle but relevant differences between boomers and next-generation clients to align firm offerings with demographic segments. Given these findings, firms that are able to confront advisors’ gaps in understanding their clients will be in a prime position to optimize their go-to-market strategy and capitalize on these opportunities.

4. Traditional channels are, and will continue to be for the next three to five years, the key medium through which clients interact with wealth managers. Clients’

views appear to point at digital channels playing a complementary role to traditional channels, with very little migration expected from traditional to digital. In this sense, digital channels effectively expand, but do not replace, the interaction options for clients. This poses some challenges for wealth managers, namely the importance of delivering a consistent experience across all channels while also balancing and prioritizing efforts and investments across a wider distribution infrastructure.

5. Although the demographic trends and implications of baby boomer clients and advisors retiring have been discussed for over a decade, advisors still consider generational wealth transfer and a lack of business succession planning to be among the top business risks. Firms need to revisit their current strategies and be focused on acquiring the next generation of clients as well as advisors. Talent acquisition and development is one of the areas where advisors are the least satisfied with their firms. Firms need to appreciate that the talent development methods that worked for baby boomer advisors may not work the same way for the next generation of advisors and revisit how they view incentive structures, branch support models and teaming incentives to position the next generation of advisors for success.

As we experienced in last year’s survey, the above-mentioned themes apply across the Americas, but some key differences arise between North America and Latin America. Several distinctions are due to the fact that Latin American clients currently work with many more wealth managers than their North American peers, though their intention is to consolidate assets into fewer firms. As a result, breadth of product sets and channel offerings are

key factors influencing the decisions of Latin American clients across the life cycle. Other differences, mainly around channel preference and usage, can be explained by some of the cultural and environmental differences between regions. Going forward, firms must take into account these regional differences when determining strategies and operating models. This is especially true as firms move toward globally consistent models to deal with more challenging economics and a more stringent global regulatory environment.

This is a time of significant evolution in the wealth management industry, illustrated by possibly the greatest wealth transfer in recent history, retirement of the current generation of advisors, mobile technology innovation and transition to holistic goals-based planning. Our survey illustrates some of the key challenges and opportunities shaping the market for wealth managers in the Americas during this time of change. Those firms that can reshape their strategies and operating models to capitalize on the key macro-trends, absorb and leverage the increased complexity and sophistication of clients and advisors, and consistently address the changing needs of these constituencies will be in a prime position to benefit from the opportunity these challenges present.


Methodology and respondent profileIn February 2014, Oxford Economics surveyed financial advisors and clients in four markets: the US, Canada, Brazil and Mexico.

To understand and contrast the behaviors and views of advisors and clients, EY stipulated that one-third of advisors work for, and one-third of clients belong to, each of the following wealth segments:

• Mass affluent (MA) = US$250,000 to US$999,999 in assets

• High-net-worth (HNW) individuals = US$1m to US$24.99m

• Ultra-high-net-worth (UHNW) individuals = US$25m+

The financial advisor and client respondents were then broken down according to the following:

• Region (North America, Latin America)

• Age (19 to 39, 40 to 49, 50+)

4


Trends influencing the

industry

Key points• Advisors and firms must do

more to show the lasting value of a goals-based approach.

• Firms need to make investments to capitalize on wealth transfers and mitigate their flight-of-assets risks.

• Portfolio management customization is valued but can conflict with firms’ goals of using consistent model management and products.

6

Generationalwealth

transfer

Desire toconsolidateassets into

fewer wealthmanagement

firms

Access toproduct

specialists

Improvedservice

experienceand tools

Balance ofpersonalizedadvice andself-service

Shift fromcommission tofee-for-service

Shift toward non-traditional

investments

Geographicdiversification

Holistic goalplanning

45% 42% 38% 32%23% 23%

15% 13%

37%


Improvedclient

experienceand tools

Shifttoward non-traditional

investments

Consolidationof assets intofewer firms

Balance ofadvice andself-service


Outsourcingof some

activities tospecialists

Holistic goalplanning

Generationalwealth

transfer

55% 53%41%

32% 32%23%

15% 12%

35%

Client What are the most important trends influencing where you invest your assets today?

Advisor What are the most important trends driving your future business growth today?

When it comes to where clients invest their assets, holistic goals-based planning is the biggest influencer, especially for HNW clients (73% vs. 45% total) — however, as will be illustrated further in this survey, goals-based planning is significantly less important as an acquisition and retention factor. This stark contrast indicates that although clients value planning, advisors and firms have yet to figure out how to show clients the lasting value of a goals-based approach.

And with boomers entering retirement, wealth transfers will also have a relevant and lasting impact on advisors’ business by creating an opportunity to retain assets while acquiring the next generation of clients. However, as we’ll see, wealth transfers also pose a risk for advisors and firms that are not prepared to execute on the transition.

Lastly, clients are also eager for global investments and diversification, even as large US wealth management firms have been shedding international operations.

Advisors and clients agree on the important trends driving wealth management business growth


Lack ofbusiness

successionplanning

Clientdesire for

self-direction

Growth ofindependent

advisors


Not keepingup with

continuedrapid

technologychange


Risk of advisordisinter-

mediationdue to digital

channels

Generationalwealth

transfer

Heightened regulation,disclosure

and compliance(e.g., FATCA,KYC, AML)

67%

48%41%

24% 24% 21% 20% 16%32%

Advisor Which of the following trends represent the greatest risks for your business in the future? To capitalize on wealth transfers and mitigate the risks

associated with them, firms need to invest in training, tools and products to support this transition.

Advisors are also concerned with firms’ lack of business succession planning, also reflected in how advisors rank their firm’s talent acquisition and development programs as least satisfactory.

Ranking much lower are practice-related trends around technology enhancements, digital channels and shifting fee structures, which highlight that advisors seem more concerned with broader industry/market trends.

Generational wealth transfer and succession planning are key risks to growth, besides regulation

8

Overwhelmingly, most advisors expect to be with their current firm in three to five years. Those who expect to leave cited being dissatisfied with support teams, starting independent practices and being dissatisfied with technology/tools as the main reasons. Firm satisfaction is also high for clients, with the highest among UHNW clients and the lowest among HNW clients.

Interestingly, HNW clients are also more likely to consider leaving their advisor in the next 12 months (35%) than MA clients (15%) or UHNW clients (10%). This may indicate that HNW clients have higher expectations than the services they are receiving.

For clients that do not expect to leave their current advisor, the satisfaction level is especially high (85%). Yet, even for those who are considering leaving, half say they are either satisfied or very satisfied with their firm.

Overall, both advisors and clients are relatively satisfied with their firms

Verysatisfied

MA HNW UHNW

Satisfied Neutral Unsatisfied

55%60%

40%

25%35%

20%30%

5%0%

10%0%

20%

Client How satisfied are you, in general, with your current method of interaction with your financial advisor’s firm?

Advisor Do you expect to switch firms in the next 3 to 5 years?

89%

11%


Fewer than half of the advisors surveyed are satisfied with talent acquisition and development, which aligns with advisors’ perception that a lack of business succession planning is a top risk to business growth. To increase satisfaction and manage this risk, firms need to focus on acquiring/training next-gen advisors and developing transition plans that accommodate the needs of clients.

Although many firms invest significantly in tools, next-gen advisors are the least satisfied (46%) while boomers are fairly satisfied (72%). This reiterates the importance of continued investment in tools as a key method of driving toward effective business succession as boomer advisors retire.

And while the importance of digital tools is higher for younger advisors and clients, tool usage indicates that firms should follow a more balanced approach between traditional and new digital technology investments.

However, advisors see room to improve talent acquisition/development and tools support

Sales andmarketingsupport

Productsources

Flexiblereporting and

communicationoptions

Operations and admin

support

Tools Talent acquisition and

development

Specializedknowledge

Comprehensiveproduct set

84% 83%76%

67% 67%55%

48%

75%

Advisor How satisfied are you with your firm’s level of advisor support?

Note: contains “satisfied” and “very satisfied” responses.

10

Regardless of age/wealth segment variances, most clients still want advisors to have discretion, believing it will lead to a more personalized approach. This unified client/advisor desire for discretion is in conflict with firms’ goal of using consistent advice, models and products to increase profits and ensure regulatory compliance.

So while prescriptive policies make sense from a risk, operations and scalability perspective, advisors are less consistent about following firm-defined asset allocation models — for example, only 17% of advisors (primarily next-gen) cite firm models as mandatory.

Among clients, the next generation prefer advisors to have the most discretion, with 52% saying their advisor should have “some level” and 41% saying they should have a “high level” of discretion. However, boomers and those who are older are far more inclined to prefer a prescriptive model. UHNW clients are more inclined (85%) to prefer some or a high degree of discretion than HNW clients or MA clients (75% each).

Balance consistent approaches with clients’ preference for customization and advisor discretion

Advisor Which of the following best describes your firm’s asset allocation model management policy?

Client What level of discretion do you prefer your financial advisor to have as it relates to using a firm’s asset allocation models?

42%

37%

No advisor discretion

Some levelof advisor discretion

High levelof advisor discretion 21%

41%24%

Prescriptive(mandatory)

Recommended(strongly encouraged)

No policyexists

Optional(full advisordiscretion)

17%18%


12


Key drivers across the client

life cycle

Key points• Traditional channels and

not newer outlets like social media carry the most weight with clients.

• There is a disconnect around planning and the role of fees when clients are picking a firm.

• As the financial crisis fades, portfolio performance has become the most important issue once again.

14

Almost 90% of all clients cite referrals as the main way to learn about advisors, evidence of the importance of word of mouth from clients and centers of influence.

Though several strategies considered effective by advisors (e.g., events, media) do not seem to be directly relevant to clients, they can still be effective if they lead to increased referrals or advisor contacts. They are also more significant when targeted to specific segments (wealth- or age-based). For instance, HNW clients are more likely to hear about an advisor through marketing events (25%) or industry conferences (30%), and next-gen clients are more focused on industry conferences and nontraditional media.

Interestingly, nontraditional media ranks low among clients in comparison to more traditional marketing tactics, suggesting that wealth managers should take a balanced approach when thinking about the role of social media in their marketing toolkit.

Consider revisiting marketing strategies to align to clients’ preference for more traditional channels

Contactedby advisor

Traditionalmedia

exposure

Industryconferences

Nontraditionalmedia

exposure

Marketingcampaigns

Marketingevents

Personalreferral

Baby boomers and older Next generation86% 89%

50%58%

23%16%

9%

24%18% 18%

5%

21%14% 16%

Advisor-drivenevents

Nontraditionalmedia

exposure

Firm-driven

campaign

Traditionalmedia

exposure

Industryconferences

Firm-drivenevents

Advisor-driven

campaign

59% 59%

45% 43% 44%55%

44% 44%37% 35% 35% 33% 29% 25%

Baby boomers and older Next generation

Client How are you most likely to learn about a financial advisor with whom you may wish to work?

Advisor What are the most effective means of reaching and marketing to prospective clients?


Clients value a firm’s reputation and trust more than an advisor’s reputation when choosing wealth managers. And though planning is an important factor in driving clients to wealth managers, it becomes less relevant when actually choosing an advisor/firm. This could be because clients see little differentiation across planning offerings, which means an opportunity exists for firms that come up with a truly differentiated approach in the eyes of the client.

There is also a disconnect around the role of fees in client decisions, a trend that is apparent throughout the client life cycle.

Finally, advisors seem to overlook some key age segment differences that could be leveraged in targeted acquisition strategies and offerings: next-gen clients seem to place more importance on having a comprehensive product set, while boomers are more likely to embrace affinity-type segment-specific strategies.

Clients and advisors differ on key drivers of client acquisition, revealing areas of opportunity

Referral/advisor

reputation

Advisor’sexperience

servingclientslike me



Experienceduringsales

process

Marketingcampaigns

Competitivefees

Digitaltechnology

Goal/financialplanning

Firmreputation/

trust

73%63%

55% 55%45%

34%

18%

37%

14%

29%23%

13% 13%

0%

14% 18%11% 8%


Firmreputation/

trust

Competitivefees

Firm-generated

leads

Clientsegment-specific

strategies

Digitaltechnology

Prospectmanage-

ment

Advisor-acquired

lists

Compre-hensiveproduct

set

Referrals

53% 55%49% 52%

39% 40%32%

27%32% 28% 31% 28% 27%

13%

28%

15% 13%19%

11%7%

Client What are the key factors driving your decision to sign on with a financial advisor?

Advisor For each of the following client segments, what are the key factors driving acquisition?

16

After years of focusing on liquidity and wealth preservation after 2008, clients now say portfolio performance has become the most important issue once again.

Meanwhile, advisors highly overestimate the impact of their relationships with clients on retention, as well as the importance of the frequency and quality of their interactions. Advisors must not lose sight of delivering against clients’ performance expectations while focusing on improving their relationship management capabilities and the client experience.

Goals/financial planning ranks fairly low for clients, suggesting they see little value in their current planning offering as a retention factor. Capitalizing on the planning opportunity then requires not just a differentiated offering that attracts clients but also one that delivers value across the life cycle by keeping them engaged and interested.

For retention, clients rank portfolio performance as tops, while advisors also cite their relationship

Advisorrelationship

Firmreputation/

trust

Frequencyand quality

of interactionswith myfinancialadvisor


Digitaltechnology/

channels


Ability toview my

comprehensivefinancialpicture


Transparentreporting

Portfolioperformance

73%68%

45%53%

32%24% 23%

16%23% 26%

18%8%

37%

5%

18%9% 5%

18%

Advisorrelationship

Firmreputation/

trust




Digitaltechnology/

channels


Ability toview my





67%72% 71%

64%

31% 31%39% 43%

9%20%

4% 5%11%

27%20%

32% 31%23%

Client What are the key factors keeping you with your financial advisor?

Advisor What are the key factors driving client retention?


While advisors don’t see fees as a top driver of client attrition, clients rank them second among all factors. Fees (though not critical from an acquisition perspective) do matter in terms of retention. As such, wealth managers should consider these changes when determining fee structures.

Retention insights also confirm advisors’ view of wealth transfer as a risk. This reinforces the need for wealth managers to develop a comprehensive approach to identifying and addressing wealth transfers in order to maintain the assets being transferred.

Advisors also seem to overestimate the impact of their own departure on client attrition.

Key attrition drivers show the importance of portfolio performance and put fees in the spotlight

High fees Limitedfrequency

and/or poorquality of

interactionswith myfinancialadvisor

Wealthtransfer to

a beneficiary

Departureof advisor

Poorservicequality

Lack ofself-service

Limitedchannels forinteracting

with the firm

Decliningfirm/brandreputation

Limitedproductsources

(i.e., proprietary

productsonly)

Poor portfolio

performance

68%55%

41%23%

14% 9% 9% 9% 5%

36%

High fees Limitedfrequency

and/or poorquality of

interactionswith myfinancialadvisor

Wealthtransfer to

a beneficiary

Departureof advisor

Poorservicequality

Lack ofself-service

Limitedchannels forinteracting

with the firm

Decliningfirm/brandreputation

Limitedproductsources

(i.e., proprietary

productsonly)

Poor portfolio

performance

63%

24%39%

53%

32%16% 19%

8% 1%

39%

Client If you recently left a financial advisor, what were your primary reasons for doing so?

Advisor When clients leave, what are their primary reasons for doing so?

18


Service channels today and in the

future

Key points• Digital channels rank lower

for clients and advisors, although there are generational differences.

• Wealth segments vary in channel preferences and value having multiple options to choose from.

• Usage data shows that boomers have a broader scope of digital channels than next-gen clients.

20

Face-to-face interactions are the most relevant channel, though some discrepancies exist between clients and advisors as to where those interactions occur (in-branch for clients, out of branch for advisors). Both clients and advisors also see telephone and email as key channels.

Digital channels rank lower for both clients and advisors. Notably, the tablet’s relevance when seen as a separate channel is marginal, yet use of online/firm websites is relatively important, and the tablet is a key enabling device for these channels.

While channel usage trends are mostly consistent across client age groups, boomers are much heavier users of email, while next-gen clients use smartphones more frequently.

Among all client age segments, traditional service channels are favored now and in the near future

Telephone Email Firmwebsite

Client perspective Advisor perspective

Smartphone Face-to-face(out of branch)

Direct mailTabletOnlineFace-to-face(in branch)

79%

59%53%

47%

67%

43%48%

22%12%

20%

7%

20% 23%

0%

15%10%

3% 3%





73%

45%53%

43%

65%

42%36%

20% 16% 20%13%

22%

36%

2%

18%7% 11%

3%

Client Through which channels do you most frequently conduct transactions or obtain other services from your financial advisor?

Today

In 3 to 5 years




SmartphoneFace-to-face(out of branch)

Direct mail TabletOnlineFace-to-face(in branch)

21%

52%53% 53%

65%

52%57%

22%15%

22%

72%

17%8%

2%12% 10% 7% 3%





33%

47%48% 50%

67%

48% 51%

18%12%

32%

63%

15% 12%2%

12% 7% 7% 9%

Client Through which channels do you most frequently communicate with and receive information from your financial advisor?

Today

In 3 to 5 years

22

The branch is and will continue to be the preferred channel for UHNW clients. In contrast, they are the least likely to use out-of-branch interactions and are also much less likely to use telephone or email.

HNW clients expect out-of-branch interactions to become their primary channel in the future but will continue making significant use of in-branch meetings.

MA clients prefer the telephone and email over face-to-face interactions. They are also, and will continue to be, the heaviest users of smartphones.

Varying channel preferences and usage trends across client wealth segments show need for diverse offerings


UHNW MA



60%

30%40%

50%55%

45%

30%35%

5%

25%20%20%20%

0% 0% 0%

15%

25%20%

15%

25%

5% 5%15%

10%

50%

70%

HNW


UHNW MA



50%

35% 35%

55%50%

45%

30%25%

10%

25% 25%20%20%

5%0% 0%

15%

30%

15%10%

35%

10%5%

10%5%

40%

75%

HNW


Today

In 3 to 5 years



UHNW MA



55%

30%

50%60% 55%

60%

40%30%

5%

30%

10%

45%

10%0% 0%

5%5%

30%

15% 15%5%

15%10%

5%

15%

50%

75%

HNW


UHNW MA



45%35%

40%

65%

50%55%

40%

20%

5%

30%

20%

55%

20%

0% 0%5%5%

30%

10% 15%5%

15% 10%5% 5%

45%

65%

HNW


Today

In 3 to 5 years

24

Digital channels are widely used by clients, especially for viewing account information and tracking portfolio performance. Advisors significantly underestimate the importance of providing portfolio performance through digital channels, especially given the impact of performance on retention. As wealth managers continue evolving their digital offerings, portfolio performance should be a key component.

Interacting through social media ranks last among client activities being conducted through digital channels. This further supports the fact that firms should avoid placing too much focus on social media within their digital strategies.

Overall, channel trends suggest that clients are less interested in migrating from traditional to digital channels. Rather, they value having multiple channel options from which to choose. This reaffirms the need to develop multichannel strategies in a coordinated manner.

Clients still leverage digital channels, particularly for account and performance information

View/manageportfolio

performance/analytics

Conducttransactions(e.g., move

money, trade)

Today 3–5 years

Accessresearch

and advice

Track goals Interactthrough

social media

Open accountsCollaboratewith financial

advisor

View accountinformation

72%82%

65% 68%57% 57%

50%58%

43% 42% 43% 42% 40%47%

18% 20%




money, trade)

Today 3–5 years

Accessresearch

and advice


social media


advisor


87%89%

35%

48% 45%55% 59%

72%

39%47%

39%45%

53% 55%

33%41%

What activities do you (your clients) perform through digital channels today? What activities will you (your clients) perform through digital channels in 3 to 5 years?

Client perspective

Advisor perspective





money, trade)


Accessresearch

and advice


social media


advisor


79%86%

68%63%

50%61%

45%53% 55%

37%

50%39% 36%

42%

14%21%




money, trade)


Accessresearch

and advice


social media


advisor


68%77% 77%

63% 59% 55% 55%61%

55%

34%

59%

32%

50%45%

23%18%

What activities do you perform through digital channels today? What activities will you perform through digital channels in 3 to 5 years?

Client perspective today

Client perspective in the next 3 to 5 years

A common misperception is that next-gen clients are more inclined to leverage digital channels, yet usage data shows that boomers have a broader scope of digital channels. This trend is even more evident when looking at clients’ future expectations of digital channel use: for most interactions, boomers expect to use more digital channels in the future, while next-gen clients are less consistent about whether their use of digital channels will increase or not.

As a result, wealth managers’ digital strategies should avoid any biases toward younger clients so that the requirements and expectations of boomers are factored in as well.

Boomers are more inclined to expand digital channel usage in the near future

26


Latin America

Key points• Latin American clients aim

to consolidate assets: 47% of them work with more than four firms.

• Advisor campaigns and other traditional marketing tactics are much more relevant here.

• Broad product sets and digital offerings are vastly more important than in North America.

28

North American clients are less definitive than Latin American clients regarding the trends driving their investment decisions. Latin American clients are clearly driven by holistic goals-based planning, generational wealth transfers and a desire to reduce the number of firms with whom they work, and they tend to work with more wealth management firms: 47% work with more than four firms compared to only 2% of North American clients.

As Latin American clients look to consolidate their relationships, wealth managers’ abilities to provide comprehensive product and multichannel offerings will be key to capitalize on this opportunity, as we’ll see in the next few pages.

Latin American clients have a distinct interest in consolidating their assets into fewer firms

Latin America North America

Generationalwealth

transfer

Holisticgoal

planning

Geographicaldiversification

Access to product

specialists


Improvedservice

experienceand tools

Shift towardnontraditionalinvestments

Shift fromcommissionto fee-for-

service

Balance ofpersonalizedadvice andself-service

74%

53%

32%

53%

29%

42%

27%

42% 41%

21% 24%

5%5%

20%

5%

17%

32%32%


Generationalwealth

transfer

Holisticgoal

planning

Geographicaldiversification

Improvedclient

experienceand tools


Balance ofadvice andself-service

Shift towardnontraditionalinvestments

Shift fromcommissionto fee-for-

service

Outsourcingof someactivities

to specialists

59%52% 54%

41% 42% 41%

27%33% 35%

30%19%

7%

22%

38%

11%17% 15%

52%

Client What are the most important trends influencing where you invest your assets today?

Advisor What are the most important trends driving your future business growth?



Personalreferral

Contacted by advisor

Marketingcampaigns

Industry conferences

Marketingevents

Nontraditionalmedia exposure

(e.g., online, social media)

Traditionalmedia exposure

89%79%

44%37%

5%

32%

12%

32%

12%21%

12% 11%22%

88%


Firmreputation/

trust

Referral/advisor

reputation


Marketingcampaigns


Competitivefees

Advisor’sexperience

serving clientslike me

Digital technology

Experienceduring sales

process

84%79%

44% 42%

24%32%

20%

32%

5%11%

2% 0%11%

51%

11% 15%24%

59%

Marketing — Client How are you most likely to learn about a financial advisor with whom you may wish to work?

Acquisition — Client What are the key factors driving your decision to sign on with a financial advisor?

Though referrals are the key channel across regions, advisor campaigns and other marketing tactics (e.g., events and conferences) are much more relevant in Latin America than in North America.

On the acquisition front, Latin American clients weigh reputation, both the firm’s and the advisor’s, more heavily than North American clients.

Another key difference arises around product set as a driver of acquisition, especially as Latin American clients look to consolidate wealth management relationships. North American clients, on the other hand, are significantly more focused on finding advisors that have experience with similar clients and with the sales process.

Latin American clients place much more value on firm and advisor reputations

30

Retention drivers provide further evidence of Latin American clients’ focus on product breadth (already highlighted as a key acquisition factor). The channel offering among Latin American clients is a newly important element. Although not seen as a key acquisition driver, channels (specifically digital ones) do seem to become highly relevant once the relationship is established.

It’s interesting to note that transparent reporting, frequency and quality of interactions, and goals/financial planning also seem to be rather insignificant to Latin American clients.

To capitalize on or mitigate the potential risk of asset consolidation in Latin America, wealth managers will need to focus on key fundamentals: competitive portfolio performance, a strong product offering and a comprehensive suite of channels.

Product set and digital channel offerings are emphasized when assessing existing wealth managers




Firmreputation/

trust

Advisorrelationship

Digitaltechnology/

channels

Ability toview my






79%74%

10%

68%

5%

42%54%

21%29%

16% 12%

0%0%

17%

0%

27%

10%

66%

Retention — Client What are the key factors keeping you with your current financial advisor?


However, there is one notable exception to this trend: viewing portfolio performance. This could be the result of wealth managers’ limited ability to provide performance through digital in Latin America.

Interestingly, clients in Latin America suggest their usage patterns will change, with typical digital activities decreasing (like viewing account information and conducting transactions) and more complex interactions increasing (like accessing research and advice and opening accounts).

Heavier usage of digital channels shows why they are emphasized as retention factors



Conduct transactions

Accessresearch

and advice

Track goals Collaboratewith financial

advisor

View portfolioperformance/

analytics

Open accounts Interactthrough

social media

89%

68%

51%

68%

41%

53%

39% 42% 44% 42%

76%

32%

44%

26%15%

78%



Conduct transactions

Accessresearch

and advice

Track goals Collaboratewith financial

advisor

View portfolioperformance/

analytics

Open accounts Interactthrough

social media

58% 58% 56%

84%

46% 42% 41% 37%44% 42%

80%

47% 46%

32%15%

78%

What activities do you perform through digital channels today?

Client today

Client in 3 to 5 years

32

Differences across channel usage seem to reflect some cultural differences, which wealth managers should consider in developing their offerings and strategies for Latin America. Latin American clients prefer the personal, live interaction of the telephone vs. the formality and low-touch nature of email. They also tend to make greater use of out-of-branch interactions than their North American peers, which may be driven by some of the challenging elements of life in large Latin American cities (e.g., mobility, security) but also by the potential offshore nature of some of the relationships.

In this sense, the common thread across regions from a channel perspective is the importance of making multiple channels available to clients for them to conduct their business and interact with advisors.

Still, traditional channels are relied upon most for interacting with advisors and their firms

Telephone EmailFirmwebsite

North AmericaLatin America


Direct mailTablet OnlineFace-to-face(in branch)

74%

34%

58%51%

26%20%

26%

10%21% 20% 16%

56%

16%7% 11%

24%

0% 0%




Direct mailTablet OnlineFace-to-face(in branch)

63%

34%

58%51%

21% 20%

37%

10%16%

22%

11%

56%

5% 7% 11%

27%

5%0%


Today

In 3 to 5 years






74%

44%53% 54%

37%

15%

32%

17% 16%

68%

16% 17%5%

12%5%

15%

0% 2%





58%

46%37%

54%

32%

12%

53%

22%

5%

68%

5%

20%

0%10%

5%15%

0% 2%


Today

In 3 to 5 years

34


ConclusionAs this survey illustrates, key macro-trends are driving significant changes across the two key constituencies to whom wealth managers cater. To successfully capitalize on the opportunities presented by this changing landscape, firms will need to change and adapt their operating models and strategies while dealing with the pressure of increasing regulation and decreasing margins. Some of the key elements of success that we have identified in our work with several clients across the industry are:

• Consistently understand and address client needs. Key insights surfacing from this survey include the disconnects between clients and advisors, showing opportunities for improvement in terms of understanding clients’ needs. Firms should implement mechanisms to consistently and continuously obtain direct client feedback, in addition to relying on advisors for understanding client needs. Financial institutions are increasingly relying on data and analytics throughout the client life cycle to improve the client experience, acquisition and retention. This is especially relevant given the changing demographics of clients and the generational wealth transfer trends.

• Make talent development and succession planning a strategic priority as boomer advisors retire and the next generation of advisors takes charge. Given the heightened demand for new talent, firms need to appreciate that breeding success with the new generation may require a different model from

that of their predecessors. Rethinking new forms of partnership models, branch support allocation methods and incentive payout structures, among other things, can be used to increase the success rate of the next generation of advisors.

• Shift toward a goals-based planning approach that guides the relationship between clients and advisors across the complete client life cycle. As seen here, although clients seem to understand the significance of goals-based planning, it does not drive how they conduct business. The key is to offer a truly differentiated approach that clients can understand and relate to and that is leveraged across the client ife cycle to address their changing needs. Shifting the conversation from “How did I perform against the benchmarks?” to “How did I perform against my goals?” should be a key component of this approach.

• Develop and execute against a comprehensive channel strategy based on coordination and consistency across all channels. Though clients have a strong preference for traditional channels, it is also true that they leverage digital channels for many of their interactions with wealth managers. This enhanced distribution and servicing platform creates new opportunities to interact with clients and gain insight into their preferences and needs. But capitalizing on these opportunities requires a well-coordinated and consistent channel strategy, aligned to the expectations of various client segments.

• Support the strategy with a nimble and highly flexible operating model. As we learned from last year’s survey, most firms across the industry have been investing heavily in streamlining and replacing their operational and technology platforms to capitalize on all these opportunities while also meeting regulatory requirements. As this process continues, firms need to make platform flexibility a key operational requirement to cope with the continuous change and evolution of the business and regulatory environment.

Successfully delivering and executing against these elements will enable firms to transform the uncertainty inherent in the evolving landscape into sustainable business growth.

36

EY contactsMarcelo N. FavaPrincipal Ernst & Young LLPFinancial Services+1 704-350-9124 [email protected] Nalika C. NanayakkaraPrincipalErnst & Young LLPFinancial Services+1 212 773 1097 [email protected] Juan Carlos LopezExecutive DirectorErnst & Young LLPFinancial Services +1 305 415 1708 [email protected]


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