Why a hybrid approach could help wealth managers to reduce client churn

Attributed to Gery Dachlan, Managing Director, South Asia and Australia, Avaloq.

The pandemic has inexplicably transformed the wealth landscape of Asia Pacific. Singapore has become a go-to location for family offices to set up shop. Hong Kong maintains one of the healthiest IPO pipelines in recent years. Startups in Southeast Asia attracted billions of funding this year. All that influx of money has certainly given wealth managers a larger mandate to do more for their well-heeled clients. Robo-advisers and innovative digital wealth management tools are fast-growing in prominence—wealth managers should sit up and take note.

In a study commissioned by Avaloq, only 17% of affluent-to UHNW investors claimed to use a financial adviser, with 22% planning to work with one in the future. The reality is that many more may work with financial advisers who are too passive, or investors consider themselves the decision-makers when it comes to managing their wealth. Just over a third of investors had no intention of switching their advisers, but just under a third were thinking of doing so. More than half of respondents cited high fees and weak portfolio performance as the drivers for pushing them to shop around for a new financial adviser.  

Therefore, offering lower fees and ensuring you’re making sound investments that translate to profit are the most straightforward ways to help with client retention. Robo-advisers and digital wealth management tools have built their businesses upon this mantra—keeping costs low whilst trimming the fat and using technology to constantly streamline and fine-tune your portfolio in response to market changes. 

So, the obvious choice would then be for financial advisers to turn to technology, right? After all, Avaloq’s study revealed that 30% of those surveyed state that an adviser’s perceived lack of modernisation or reluctance to adopt new technology is a deal-breaker. However, this does not mean that not harnessing technology is frowned upon. It only serves to reinforce the fact that clients care less about the technologies themselves, and more about how their day-to-day will improve when advisers leverage them.  

There is a desire amongst investors for their advisers to incorporate the likes of cryptocurrency, robo-advisory and mobile touchpoints into the suite of offerings. An adviser should not adopt new technologies for the sake of appearing modern and keeping pace with the digital offerings in the market, but rather leverage them to be more intuitive towards client needs. With the right technological tools at their disposal, advisers can reduce costs through greater scalability, increase transparency, adapt to the ever-changing market and economic conditions, and offer a more tailored suite of services.  

Avaloq’s research, part of an extensive international study looking into investment behaviours and market sentiment of wealthy investors, also found that the majority of those surveyed, regardless of whether they have a financial advisor or not, said they would prefer a hybrid model, one in which AI supports their relationship managers and financial advisors. Between 47% and 56% of respondents with and without a financial advisor said they would prefer a hybrid approach when it comes to the management of their personal details, answering portfolio questions, performance analysis, and the receiving of product recommendations and investment advice. 

So, how can wealth managers and financial advisers better utilize AI when working with their clients? Just as Rome was not built in a day, financial advisers should start small. Use bite-sized solutions to test their efficacy and investor comfort levels, as these would help to better control governance, security, compliance, and ethics. Have scale at top of mind when adopting a solution to solve a pain point. Anything adopted now should be able to be applied to solve other pain points down the line, which can help to make a stronger business case and help to move the needle in terms of ROI.