Wealth managers failing to capture mass affluent clients

Disruptive technology is allowing wealth managers to deliver personalised high-net-worth solutions to their clients, described by PwC as the “ultimate prize” for these organisations.

According to PwC’s global Asset and Wealth Management (AWM) survey, this disruptive technology – classed as artificial intelligence, cloud infrastructure, big data analytics, and blockchain – is allowing wealth managers to reach the mass affluent demographic, open up new value propositions, and sharpen competitive relevance.

The mass affluent demographic is forecast to grow from US$96.3 trillion in 2023 to US$408.2 trillion by 2028.

More than seven out of 10 firms surveyed said they believed disruptive technology would lead to a shift in consumer preferences towards technology-enabled solutions. It can also improve client profiling, analysis, and insight to allow advisers to focus on face-to-face time with clients.

This is particularly the case for the younger digitally native generation who seeks a technology-driven, engaged approach from their wealth manager and PwC said it is worth it for wealth managers to pursue this generation as they will be beneficiaries of the intergenerational wealth transfer.

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However, the consultancy said wealth managers are failing to capitalise on this opportunity as well as they could be doing.

“The big question is whether AWM organisations are moving far and fast enough to capitalise on the opportunities and keep pace with the tech-driven shake-up in their industry. Most asset and wealth managers (68 per cent) currently allocate less than one-sixth of their total capital expenditure to innovative and potentially transformative technologies,” it said.

“The question is especially pressing for a potentially ‘squeezed middle’ set of companies that generally lack both the scale and sizeable investment budgets of their larger counterparts and the targeted niche focus of specialist players.”

This was also the case across the use of disruptive technology with only 20 per cent of AWMs using it to enhance personalised advice.  The most commonly used technology was AI (73 per cent), generative AI, and cloud infrastructure (both 71 per cent). 

“Disruptive tech can help meet these expectations in a customised and cost-effective way by allowing more data about a client’s objectives, risk appetite and capacity for risk to be analysed, more quickly, across a much bigger client base. But the potential is still untapped. For instance, only 20 per cent of asset and wealth managers are currently using disruptive tech to enhance personalised investment advisory,” it said.

“The convergence of disruptive technologies is reinventing everything and putting pressure on existing tech and data infrastructure.”

When it came to their concerns, more than half of AWMs said they see their organisation’s lack of appropriate technology infrastructure (58 per cent) as a hurdle in adopting disruptive tech. Another 67 per cent said they were concerned about the accuracy of decisions made by technology.

“In this new world, reactive compliance frameworks aren’t enough on their own. Priorities include the development and embedding of an ethical framework that addresses data privacy, security, algorithmic bias and transparency. It’s also important to provide clear communication to clients and investors about the technological tools and AI models used,” it said.