Exploring investor trends and organizational realities in the changing wealth landscape

By Javier Puga Chief Marketing Officer

The 2023 EY Global Wealth Management Research Report, “When volatility causes complexity, how can wealth managers create opportunity?” draws its insights from a sample of 2,600 investors across generations, geographies, and wealth segments. 

The report, which you can find here, paints a picture of the current wealth landscape, including challenges, client expectations, and ways to deliver value. Earlier this year, our team at Unblu compiled our Wealth Management Outlook report for 2023, which deals with many of the areas the EY report focuses on. 

Since the publication of EY’s report, we’ve taken great interest in reviewing our own work in the light of these insights, which we believe offer a reasonable, aggregated view of what is important to wealth management clients. Furthermore, we’ve also been able to balance these client-centric insights with our own research, having carried out interviews with key players in global consultancies and financial services institutions.

We believe that this combined research, which offers the perspectives of all stakeholders, can unveil key insights for firms looking to capitalize on client demands and accelerate AUM growth in the long term.

Approaches to complexity

It’s undeniable that we are living through a period of unprecedented complexity. Unblu’s CEO Luc Haldimann addresses this in the foreword of the 2023 Wealth Management Outlook, making reference to the aftermath of the pandemic and the Russian invasion of Ukraine, among other points. 

What’s more, the fallout from these events have been widespread, with the global supply chain badly affected and a marked increase in food and energy prices – and further complicating challenges that already existed. These trends include the “great wealth transfer,” increasing digitalization, and shifting service expectations. 

The EY report begins with a similar approach: 

“The world — still emerging from the biggest pandemic in our lifetimes — was further shocked by war, continued supply chain disruption, an energy crisis, a sudden surge in inflation, and attendant challenges in the banking industry. This additional impact compounds the preceding events, affecting markets, investors and wealth managers in different ways.”

Top six key trends

Expanding on this landscape of complexity, the EY report then sets out the six trends “that illustrate how the events of recent years have affected the experience, sentiment and intentions of wealth management clients around the world.”

These trends are:

1. Market volatility and complexity. They report that 40% of clients consider managing their wealth to be more complex in the last two years. Conversely, 14% say it has become easier. 
2. Defensive financial goals. Unsurprisingly, the uncertainty is leading to a defensive focus, with the three main goals now protecting against inflation, strengthening investment returns and ensuring financial security. There’s also been a 30% decrease in legacy goals, such as family wealth transfer and charitable giving. 
3. Evolving interaction preferences. The Unblu report also spends a considerable amount of time on this point, which is backed up by EY who say, “virtual collaboration is now preferred for a number of key ‘in-flight’ advisor interactions such as receiving financial advice and account management.”
4. Satisfaction gap with traditional and new investment types. Another interesting point that builds on interaction preferences. For newer investment types, clients require more in-depth advice, which is only possible through more innovative approaches to client communication. 
5. Multiple providers becoming the norm. EY reports a stronger preference for working with multiple clients, despite more defensive goals. They claim that on average clients will increase the number of advisor relationships by 12% in the next three years. The trend is higher among millennial investors at 73% than Boomer ones at just 29%.
6. Maximizers vs Satisficers. With increased volatility, the infesting behavior of clients becomes more important. The two strategic approaches are fairly evenly distributed, with 59% constituting Maximizers and 41% as Satisficers. Each group has different preferences for engagement frequency (Maximizers prefer more advice than Satisficers) and Maximizers are 72% more likely to switch providers. 

The institutional POV

Meeting the needs of clients given the volatile landscape is no easy task, and institutions are well aware of what needs to be done. However, from an institutional perspective, there are other challenges and considerations that should be taken into account. 

Drawing from exclusive interviews with members of key industry organizations, Unblu has been able to gain insights about how firms and private banks are confronting these challenges. Overall, there’s a recognition that rising interest rates, market volatility, and the interplay between large and niche players is of concern to organizations, as attested to by a multinational investment bank and financial services company. 

However, out of this, two key challenges are emerging across the board: increased competition and talent training or retention. 

As a representative from a professional services company expressed it: 

“The enterprise reinvention of firms is leading to a tougher competitive environment and greater need for value or cost differentiation. There are also shortages of talent in key roles including advisors, investment specialists and technology staff. A third of advisors are expected to retire in the next 10 years.”

The sentiment regarding advisors – which extends to remaining competitive – was further echoed by a global Client Lifecycle Management technology provider, who said:

“The average age of advisors remains high, with firms overexposed to the retirement of the current cohort of relationship managers and the ‘war on talent’ is making hiring challenging. To support the next generation of advisors, firms will need to upskill staff both internally and recruit externally to help bridge the gap. Having modern tool sets to enable a younger generation of advisors will be key to both retaining these staff, but also enabling them to service more clients on a ‘hybrid basis’.”   

Investor reactions to complexity

With the six trends acting as a backdrop, the EY report delves into the ramifications in terms of investor behavior. Some of the stand-out insights include:

Varied reactions to complexity.

The report states that “exceptional market swings of 2020–22, and the possibility of further adjustments, are having a clear impact on investing behavior.” Much of this has to do with mitigating risk, with 33% of clients looking for safety in the shape of savings and deposits. 

The most daring groups, however, were Ultra-high-net-worth (UHNW) and millennial clients, 46% and 50% of which (respectively) were more likely to have de-risked. This follows a trend identified in Unblu’s Wealth Management Outlook, stating that: 

“Cryptocurrencies are popular among younger investors, with a reported 44% of millennials eager to find out more about this area, compared to only 12% of the over 55 group (Refinitiv’s Wealth Management Report).”

New sources of advice. 

As mentioned in the six trends, clients are looking for new sources to receive advice. Again, this point was explored in the Unblu Wealth Management guide, particularly with regard to the great wealth transfer. In that report, findings taken from Capgemini found that 80% of millennials look for new financial advisors once they’ve inherited their parents’ wealth. 

The EY findings further back this up, although in this context it’s directly linked to market volatility. Among those surveyed, 49% of millennials and 23% of Boomers have sought new advice because of this. 

Institutions may find it difficult to meet these new demands, with the talent shortage and looming retirement of advisors posing challenges. That said, steps are being taken to address this issue, as the global Client Lifecycle Management technology provider says:

“We see several firms looking to ‘cross-train’ staff from other industries, using academies and other tools to help bring in new advisors who are looking to change careers. We also see firms looking to more clearly define internal promotion paths, upskilling support staff, and other client-facing roles such as paraplanners to become future advisors.”

Key takeaway

Challenges abound but complexity breeds opportunity. If wealth managers are able to embrace innovative approaches and overcome operational or talent-based challenges, there is a lot of value in clients’ willingness to access diverse sources of advice. 

Client empowerment

The Unblu Wealth Management Outlook placed significant emphasis on service experience as a vehicle for empowering clients. From our point of view, communication that combines the best of digital tools with human expertise is essential for long-term growth. 

This approach is called conversational engagement and is built upon the shifting sands of technology and client expectations, with in-person meetings becoming less and less popular. The Wealth Outlook draws on key statistics such as 34% of millennials and 35% of Gen X investors considering digital capabilities being “an important factor when choosing a wealth management advisor” – alongside the importance of personalized advice. 

The Unblu interview with a professional services company further backed this up, with the representative saying that:

“There are now a much greater range of channels available which enables access to and  delivery of offerings by combining human contact with self-service in optimal ways to deliver better, faster, and more relevant solutions to suit a wider range of client types and needs. Post COVID, it’s becoming clear that the majority of clients prefer some human contact for their investment and advice needs and so the shift to modern hybrid models will continue to evolve.”

Unsurprisingly, EY’s report also echoes these sentiments, stating that: 

“Tech-enabled personalization – across discovery, onboarding, planning, investment management and account maintenance – is key to differentiation and client empowerment.” 

In fact, their latest research shows that personalized engagement ranks as the most important factor in client satisfaction.

Multichannel offerings

EY takes this even further by focusing on the digital collaboration tools that are necessary for robust client communication at a sustainable cost. Their findings are highly interesting and align with Unblu’s approach to conversational engagement. 

The standout findings include: 

• 46% of clients claim that virtual consultations are their preferred channel for advice. 
• 71% want regular or periodic advisor contact and 84% value efficiency in inquiry responses.
• Collaborative tools across channels that offer a balance between in-person, virtual and digital experiences are ideal for personalization and can control costs.
• Phone or video conversations for virtual advisor interactions are the preferred channel for investment advice.
• 72% want advisors to have a good understanding of their goals and values when it comes to choosing products.

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Key takeaway

The means of communication plays a significant role meeting client expectations across a broad spectrum of client-centric criteria. Conversational engagement not only offers advisors this ability, but it also does so in a cost-effective manner. 

Taming complexity with Unblu

The EY report begins by addressing six trends that define investor behavior: market volatility and complexity; defensive financial goals; evolving interaction preferences; new and traditional investment types, a move to multiple providers; and appealing to Maximizers vs Satisficers.

The scope of these trends is undeniable, presenting significant challenges for all stakeholders, whether investors, advisors, or the wealth management firms themselves. Yet they also represent avenues for opportunity. 

At Unblu, we strongly believe that the quality of the relationships between clients and advisors will dictate the ability to navigate this context effectively and determine levels of success moving forward. In complex situations, strong communication is the key – and conversational engagement that allows clients to interact when they want and on the channel of their choice represents a significant strategic advantage. 
If you’d like to find out more about conversational engagement and how it can help you to deliver value, reach out to us today.