EY has calculated how much revenue may be at stake in the global wealth management sector on the basis that four in ten clients would switch advisors given the right opportunity.

An unsettling 40 per cent of clients recently surveyed by EY said they are open to switching wealth managers under the right circumstances, meaning up to $200 billion in revenue could be at stake, the organization warned. 

“The dynamics of the wealth management industry are changing rapidly,” said Gregory Smith, EY's wealth management advisory leader. 

“Retaining clients will become a high priority for firms, given the increasing awareness around robo advisors and new advice models. Wealth managers need to engage their clients more than ever and invest in a creating better customer experience – increasingly using digital technology,” Smith said.

EY found that wealth managers and clients at times have opposing views in three key areas: transparency, advice delivery channels and the advisor's role. Firstly, clients are increasingly questioning the transparency of portfolio performance and fees, and are eager for a “new level of transparency” that includes rating their advisors and connecting with similar clients in through forums, the organization said. 

Meanwhile, clients are “significantly more open than firms” to using digital channels for wealth-related advice - not just service, it added. “Advisors should ask themselves, what's the optimal wealth advice model - human, machine or hybrid? What about using social media to 'talk less and listen more' to increase retention and referrals?”

Finally, EY suggested that financial advisors may become more like financial therapists in the future, helping clients with spending habits, for example, or reaching life goals instead of simply providing asset allocation advice or other activities that could be automated.

Respondents also “overwhelmingly identified” the top driver of trust as transparency of portfolio performance and fees, with their advisor's reputation now in second place, the firm said. 

Wealth managers in Canada, with the advent of CRM2, face similar challenges as their global counterparts, Smith added. “They need to expand their services accordingly to offer more comprehensive, goal-oriented advice. On top of that, they must consider engaging with clients through digital platforms and even social channels.”

“We've seen an increase in regulatory requirements to offer more transparency to clients and we might well see more of this in the future, as the Canadian Securities Administrators are considering a proposal on advisor obligations to clients,” Smith continued. “Wealth management firms should really take a step beyond that though – listen to what clients are asking for, and deliver better transparency, integrated digital channels and a seamless experience that many new entrants are offering. This industry will only get more competitive and the needs of clients should be front and center.”

The findings from the report, entitled The experience factor: the new growth engine in wealth management, are based on responses from over 2,000 clients and 60 wealth management executives globally.