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The rich want their wealth managers to join digital age - report

Aug 16 2016 11:57
Lameez Omarjee

Johannesburg - Only a quarter of wealth managers offer digital services, beyond email to their clients, the PwC Wealth Management report revealed on Tuesday.

The report was compiled through collecting data from 1 000 high net worth individuals (HNWI) in a questionnaire, and the data was supplemented with focus groups. Financial advisers as well as CEOs and senior managers were also interviewed to contrast what companies are doing and what individuals want, explained Jorge Camarate, head of Strategy for Africa, PwC’s consulting division.

The wealth management sector in Africa is growing. “It is a reflection of the economic reality in the continent. The continent has been growing at a fast rate, but also in a highly unequal way,” said Camarate. In Nigeria, the creation of wealth is particularly skewed towards the top 1%, which is where wealth management services are directed towards.

In South Africa, the wealth management sector is worth R7trn. “South Africa is a wealth management hub for the region,” he said. Insurance products make up 32.7% of the assets, followed by pension funds, which make up 28.9% of assets. The sector is very fragmented and the largest players, such as PSG and Citadel account for 4% of the market share, explained Camarate.


Sector is poor in tech literacy

The sector is poor in tech literacy, even though it serves a consumer base, which is demanding the use of digitised services. “The wealth manager is far behind on a technology perspective, and they are lagging behind retail banks,” said Camarate.

Few wealth management firms have automated and digitised their back office and administrative functions, the report indicates. Only a handful of wealth managers use social media to interact with clients and some are investing in web portals and mobile apps.

This is mainly because there is a false perception that HNWI prefer to only have face to face communications with their wealth managers, explained Camarate. “There is also a perception that HNWI do not like digital because it leaves a trail, we expect more people to run away from tax and anything digital leaves a trail for tax authorities to trace.” But this is no longer the case, about 70% of HNWI want to engage with their wealth managers digitally.

Omni-channel communications are becoming prevalent, where clients want the option to have a face to face conversation when it comes to big investments, and then use online for more routine things, said Camarate. A lot of small companies offer wealth management services, and they delay investing in digital offerings because of the misperception that clients only prefer face to face meetings.

There is also a false perception that older HNWI are “less tech savvy” said Camarate. There are 50- and 60-year-olds who are comfortable using technology. Both older and younger HNWI have a higher degree of tech literacy and use different digital devices for their financial and wealth management needs, including online and mobile banking. Those aged below 45 are more interested in managing their investments online. And 47% of those who currently do not use robo-services consider using it in the future.

The graph below shows that 70% of individuals want an online portal or gateway to their wealth mangers, 60% want to use digital to communicate with financial advisers, 50% of clients would use digital to do their portfolio reviews, and about 40% of consumers would manage money online.

Solutions for wealth managers

Wealth managers have the advantage of having knowledge about their clients and the trust of their clients, explained Camarate. The first step towards making a change towards incorporating digital is for wealth managers to simplify their products and services. “There is a lot of complexity not needed.”

Wealth mangers should start applying technology at the back-end to automate their operations. By automating tasks, it will enhance the services offered to clients. Finally, using technology can help to create digitally enabled holistic solutions. This opens room for new revenue streams by taking a 360 degree approach to satisfying customer needs.

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pwc  |  wealth  |  investment  |  personal finance
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