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Marketing Insights: Wealth Management

November 2015

Financial Services Marketing Insights SeriesIn this 2015 edition of Marketing Insights Wealth Management, we examine the change in one of the most attractive sectors within financial services. Investments and wealth management offerings are essential to attracting and retaining high-quality, profitable retail bank customers. Mass affluent customers can typically represent 80% or more of the net income generated by retail banks, and they often regard their relationship with a provider of wealth management services as their most important financial relationship. Many retail banks are diversifying to double down investment more heavily into wealth management business. The additional investment is driven by greater growth prospects, lower capital requirements, and a higher return on equity (ROE) than most other retail bank businesses, hence their appeal to diversified financial services firms at a time when capital is viewed as more expensive, growth is hard to come by, and equity returns for the banking industry are close to the cost of capital.

“The mix of additional investments coupled with a new generation of investors has placed the wealth management industry in the midst of change. From low cost fee structures to automated capabilities, the tools and services available to the new generation of investors today offer many advantages over a dedicated broker or financial advisor. The growth and general acceptance of mobile banking, social media, and everyday financial management are making it easier to learn and start investing. In addition, these technologies have brought new standards to the wealth management industry in terms of how advice and investment products are being delivered. These new investors will control an increasing share of U.S. retail assets over the next decade to come.

Key Takeaways

  • The wealth management industry is in the midst of significant change. A new generation of investors and shifting demographics in combination with a challenging environment are making it harder for advisors to generate superior investment performance for clients.
  • A new generation of investors is bringing new attitudes and expectations to the industry. Millennials are impacting the industry and forcing companies to revamp their marketing efforts. As the largest generation in history continues to accumulate assets, investment companies are working to promote a seamless experience across the digital channels, keeping in mind that convenience and speed are important to younger investors.
  • New firms and new business models are driving higher intensity of competition. Robo advisors are growing in popularity and present the potential for significant market disruption. Changes in technology and the needs of consumers are creating opportunities for new firms to grow market share at the extent of incumbent firms, while some traditional firms are partnering and buying smaller fin-tech firms.
  • A personal touch and catering to individuality. Investors have complex needs that change depending on their personal circumstances and comfort levels over the course of their lives. They are looking for someone who is willing to help build a plan for their entire financial life, not just investing alone. Firms that can create products and services people can customize to fit their own needs will benefit from this trend.
  • The investment world has been adapting to changes in technology and the needs of its customers. Investment firms that are creating engaging mobile content— whether educational games, serious research tools, or sophisticated trading tools— can grab some of the “down time” people increasingly like to avoid and use it to strengthen their relationships with their customers.

Past Marketing Insights Reports