Why do a third of advice clients want to switch providers?

Alex Burke,  Senior Writer,  No More Practice Education

According to the EY 2019 Global Wealth Research report, 33% of advice clients have switched their provider in the past three years and a further 33% plan to do the same over the next three.

The report, based on a survey of 2,000 wealth management clients in 26 countries, also found that clients are maintaining relationships with an average of five different wealth providers, reflecting the global challenges for advice groups trying to cater to the increasingly diverse and complex needs of their customers.

So, what are the key takeaways for advisers?

New pricing models

This may not come as too much of a surprise given the recent scrutiny the industry has faced in Australia around how it charges its clients, but the survey found a significant degree of dissatisfaction with fees – not just the amount, but the way they’re being calculated.

About 46% of respondents said they were “unhappy” with the fees they were paying – adding they did not believe they were being charged fairly – and this figure rose to 66% in the ultra-high net worth cohort.

Furthermore, while percentage of assets under management was the commonest payment method used for clients in the survey, respondents expressed desire for payment models based on fixed fees and hourly support costs.

Explaining these results, EY global wealth and asset management advisory leader Alex Birkin said: “Wealth managers realize that clients expect more than just strong investment performance but struggle to communicate the value of their offerings and services.”

“The answer is not simply lowering fees,” he continued, “but rather a combination of increasing transparency and predictability when it comes to pricing models and equipping advisors with ways to communicate value beyond investment returns.”

Digital solutions

The report also noted that a preference for digital communications was rising among respondents much faster than was predicted three years ago. In 2016, 20% of those surveyed preferred mobile apps for wealth management; in 2019, that figure has already risen to 41%.

This doesn’t mean clients only want to communicate with advisers via these channels, though. Just 1.4% of respondents preferred digital and voice-enabled assistants as their primary channel, and 25% said they preferred face-to-face contact or phone calls as their main method of engagement. When talking about advice specifically, that figure rose to 42%.

Commenting on this, EY Americas wealth and asset management advisory lead explained: “As wealth managers prioritize their digital investments across multiple channels, they need to consider how client engagement may evolve in the coming years.

“This may mean reallocating budgets from websites to voice-enabled sooner rather than later, and capitalizing on hybrid models, where clients have access to both digital tools and human interaction.”

Wrapping it up

Given that it’s a global survey, it’s important to recognise some of the specific figures quoted may not exactly mirror how Australian wealth clients feel about the industry. Having said that, it’s a useful window into how consumer demands are changing – particularly around fee transparency and the need for a breadth of communications channels.


The opinions expressed in this content are those of the author shown, and do not necessarily represent those of No More Practice Education Pty Ltd or its related entities. All content is intended for a professional financial adviser audience only and does not constitute financial advice. To view our full terms and conditions, click here.

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