New research reveals profound shifts in investor needs and behaviours that will redefine the wealth industry

A global study by ThoughtLab reports dramatic changes in investor attitudes, behaviours and expectations caused by the COVID-19 pandemic. Wealth and asset management firms will need to revise their thinking about customers and introduce a more personalised approach to succeed.

The study of 2,325 investors and 500 wealth management firms worldwide found that the pandemic had upended traditional ways of thinking about investors. It was carried out in partnership with Recordsure, TCC Group, Deloitte, eToro, FIS, Salesforce, Appway, HCL, LexisNexis Risk Solutions, Refinitiv and Publicis Sapient.

The pandemic overturned conventional wisdom in the wealth management industry about how providers should serve clients. To succeed in the new marketplace, wealth and asset management firms need to revise their thinking about customers and take a more personalised approach to product and service needs.

Busting the myth

The research reverses several prevailing views about investors. The first myth is that digital engagement is mainly for young, mass-market investors. The study shows little difference in digital tastes: the proportion of investors preferring to use a mobile app to engage with wealth firms is identical for the ultra-rich, baby boomers and millennials, at 89%.

The second myth is that millennials only want to do things digitally. The research says millennials, like older generations, want personal contact when investing: 46% prefer face-to-face meetings and 40% prefer phone calls.

The third myth is that older and richer investors care less about ESG. The study found that 10% of millennials plan to invest in green bonds over the next two years, compared with 15% of boomers and 50% of billionaires. It also found that 22% of millennials plan to invest in ESG funds, compared with 32% of boomers and 36% of billionaires.

The fourth myth is that women know less about investing and are more risk-averse than men. The study shows that 24% of women have high knowledge of wealth management, compared with 16% of men, and that the proportions of both genders willing to make high-risk or very high-risk investments are largely the same.

Joe Norburn, CEO of Recordsure and TCC Group, said the digital revolution in wealth and asset management was giving investors a wider range of communication channels to use with advisers, based on the methods they are most comfortable with.

A watershed event for investors

The research programme included a worldwide survey and concluded that the pandemic was a watershed event that reshaped investor views across investments, relationships, digital interaction, products, services and fees.

• Investments: the pandemic made risk mitigation a top goal for half of investors. It also prompted about 4 out of 10 investors to include family members in more wealth decisions and to focus more on active investing and holistic financial planning.
• Relationships: about a quarter of investors reported fractured relationships with advisers due to inadequate personal service. To mitigate risks, 27% distributed accounts to more firms; among billionaires, the proportion was almost twice that number. The trend is expected to continue, with 4 in 10 investors expecting to move money to another firm within the next two years.
• Digital interaction: the pandemic made digital access a higher priority for 40% of investors and put 30% more at ease working through video and digital tools. In the next two years, three-quarters of investor interactions with advisers will be through digital channels, although face-to-face meetings will also increase.
• Products and services: more than two-thirds plan to put money into alternative investments over the next two years. Many more will invest in specialised products such as IPOs, tax-exempt instruments and ESG funds, and many plan to seek personalised planning, holistic advice and non-investment services such as insurance, tax advice and loans.
• Fees: with more time to spend on investing during the pandemic, about a third of investors reevaluated what they pay. Fewer than 4 out of 10 are happy with their wealth management firms’ fees and fee structures, and only about a third understand how advisers are compensated.

Lou Celi, CEO at ThoughtLab and Programme Director, said wealth management providers need to replace assumptions about age and wealth with a client lens focused on personal needs and life stages. An eBook with results from both surveys was due to be released in November, with further updates available from Wealth and Asset Management 4.0.