(Reuters) – Wealth management clients are increasingly willing to pay for financial advice as their needs evolve, choosing an average of five providers, with one-third switching managers in the past three years, global wealth consultant EY said on Tuesday.
The 2019 Global Wealth Research report showed another 33% plan to change providers in the next three years, and noted that no single provider can meet clients’ varied needs.
“As the industry grapples with new entrants, new technologies and changing client expectations, wealth managers must take a step back to evaluate their offerings and redefine how they provide financial advice to better meet client needs and expectations,” the EY study said. EY, also known as Ernst Young, is a global provider in assurance, tax transaction and advisory services.
The use of independent advisors and financial technology providers, or FinTechs, is expected to rise as clients seek more customized services, according to the survey of 2,000 wealth management clients in 26 countries and 50 industry executives.
The use of independent advisors is expected to rise 18% over the next three years, reflecting clients’ attraction to flexible solutions and fees, the study said.
Respondents expecting to use FinTechs will increase from 38% today to 45% in the next three years, the study said.
Traditional wealth managers should try to better understand clients and deliver according to their priorities, for example, by anticipating major life events.
Digital channels are evolving faster than wealth managers and their clients had anticipated three years ago, the study showed.
In 2016, only 20% of clients expected they would prefer to use mobile apps for wealth management activities by 2019. The latest study shows 41% of respondents prefer mobile apps as their primary channel for wealth management.
Despite rapid demand for digital solutions, respondents still desire human interaction. Twenty-five percent of respondents prefer face-to-face meetings or phone calls as their primary method of engagement, and 42% prefer these methods when receiving financial advice.
Overall, 46% of wealth management client respondents said they were unhappy with their fees and do not trust they are being charged fairly, the study showed, with dissatisfaction particularly high at 66% among ultra-high net worth clients.
“Most respondents – 55% – want their wealth managers to use a payment method that offers more transparency, objectivity and certainty,” the study said. “Percentage of AUM is currently the most common payment method; however, fixed fee and hourly support methods are most desired.”
Reporting by Jennifer Ablan; Editing by Richard Chang