Traditional wealth management players are facing fierce competition from newcomers, according to analytics company GlobalData.
The firm said that the long-awaited digital transformation of the sector means that mass affluent clients have a much wider pool of companies to choose from to manage their investments.
This means that if traditional firms do not “step up their digital services”, they will “lose out on this underserved investor segment”, it added.
Sergel Woldemichael, wealth management analyst at GlobalData, said: “Mass affluent individuals’ propensity to opt for alternative providers to manage their wealth is rising.
“In Asia Pacific, for example, only 27% of respondents prefer to use traditional banks and building societies to manage new investments. The lion’s share would rather have digital players such as robo-advisers and big tech companies manage their wealth.
“In both Europe and the Americas, traditional banks, brokers, and financial advisers are preferred by most mass affluent individuals. However, other options – from digital-only banks to new digital financial services providers – are certainly growing in popularity.
“Granted, many banks have the luxury of a large client pool, and some have decades-old, dedicated mass affluent services. Yet, they can no longer rest on their prior success with this group going forward. Digital players are providing sought-after customer experiences at pace, with big tech companies priding themselves on personalisation, and digital investment platforms providing automation and continuous service expansion at a low cost.”
But it seems that big players are not completely in the dark when it comes to the “underserved investor” client segment.
Recently, JP Morgan acquired UK robo-adviser Nutmeg to boost it forthcoming mass affluent service.
Barclays collaborated with Scalable Capital on a robo-adviser in 2020, and HSBC partnered with Amazon on a personalisation tool for its global wealth and personal banking business.
Woldemichael added: “Competition for the mass affluent demographic will continue to grow in the wealth management industry as new digital entrants and non-financial services providers make their mark.
“The covid-19 pandemic is to blame for the acceleration of this, spurring digital uptake. All in all, only the strong will survive – and in this case, ‘strong’ refers to those that can best cater to the mass affluent audience and meet their increasingly demanding digital needs.”