Recently, a very – very – wealthy entrepreneur walked away from opening a full wealth management account with a foreign bank operating in Asia Pacific once he found out it would take two weeks to get a secure online ID in order to check the status of investments at any time of day.
It’s one example of how a lack of digital maturity displayed by wealth management firms in Asia Pacific is hurting their relationships with the world’s richest people, cited in Capgemini’s 2016 Asia Pacific Wealth Report.
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According to the report, Asia Pacific now leads the world with the largest amount high net worth individuals (HNWI) wealth, growing 9.9 per cent in 2015 to US$17.4 trillion, 5.8 times the 1.7 per cent ‘Rest of the World’ growth rate. If growth rates of the last decade sustain through the next one, the region’s HNWI wealth could surpass US$42 trillion by 2025.
But all that money isn’t necessarily benefiting wealth management firms. Currently, Asia Pacific HNWIs hold less than one-third of their record wealth with wealth managers, preferring to keep their wealth in physical cash or in retail bank accounts.
According to the research, wealth management firms can no longer afford to downplay digital. Capgemini found that 85.9 per cent of HNWIs in Asia-Pacific consider a firm’s digital maturity to be an important factor when deciding whether to allocate more (or fewer) assets to wealth managers over the next 24 months, compared to only 72.4 per cent in the rest of the world.
HNWIs are also prepared to walk away if the experience doesn’t meet their expectations. Almost 10 per cent of wealth managers said they lost clients over the past 12 months due to poor digital capability at their firms. That’s almost double the 5.3 per cent in the rest of the world.
“With digital technology penetrating so many facets of modern everyday life, wealth management firms cannot afford to keep digital progress on the back burner,” the report said. “HNWIs in Asia Pacific, often self-made and independent, have become accustomed to being able to access information at their own discretion using self-service digital tools, and they expect the same high level of access to their financial and wealth-related data as much as any other data.”
Digital capabilities are more important to Asia-Pacific HNWIs than to those anywhere else in the world, and wealth managers, especially younger ones, are also highly attuned to the need for digital services.
Over time, wealth management firms in Asia Pacific may find it increasingly difficult to attract HNWIs. The region’s under-40 HNWIs are less inclined to transfer their assets to a primary wealth manager than over-60 HNWIs (63.1 per cent versus 72.5 per cent).
“Always hovering in the background is the risk that innovative competitors, such as Alibaba, WeChat, or Google (to name just a few), could introduce game-changing services, leaving traditional firms far behind. The industry is also facing increased pressure on margins and fee models, as well as talent shortages and potential geopolitical risks. Ongoing regulatory pressures add to the constraints,” the report said.
Despite a coming wave of disruptive forces, wealth management firms in Asia-Pacific remain bogged down by keeping up with day-to-day concerns, which takes a significant portion of investment budget.
Capgemini found firms are generally overestimating their digital maturity, citing a gap between the assessment scores of wealth firms and those of third-party analysts.
Firms are the weakest when it comes to engaging advisors through digital tools and helping them become more productive, scoring 2.7 on a 5.0 scale. Firms scored 2.9 in addressing the digital needs of clients, scoring equally on client experience and client capability parameters. From an enterprise perspective, firms also scored 2.9, gaining the most strength for having vision, but losing momentum in terms of fostering a widespread digital culture.
“By now, digital should not be viewed as a bonus add-on in wealth management, but a standard way of doing business. Whether a firm is operating in an economically mature region or an emerging market, it is imperative to make digital services a seamless part of the overall wealth management client experience,” the report said.
“The most successful firms are those that have made digital the centerpiece of a top-down strategy, while also taking steps to change the culture of the organisation.”