Digital wealth management entrants here to stay as boomers and millennials want a more engaging and transparent customer experience: EY report

TORONTO, May 12, 2015 /CNW/ - Digital wealth management firms have introduced disruptive industry changes that are here to stay, and traditional players need to act quickly to determine how to stay competitive, says EY.

While some have discounted the robo-advisor movement as no match to human investment advice, EY's recent report, Advice goes virtual: how new digital investment services are changing the wealth management landscape, suggests otherwise. Digital entrants' efforts to streamline the online client experience, provide greater transparency and lower prices for lower-end markets have gained traction and can't be ignored by Canada's wealth-management industry anymore.

"We have yet to see how the digital models will hold up in a market downturn and whether they will reach profitability quickly enough, but the improved client experience and high level of transparency can't be underestimated," says Gregory Smith, Wealth Management Advisory Leader at EY. "They're also tapping into markets that are largely ignored by traditional wealth managers."

Traditional firms have largely focused on high-net worth clients, but these emerging digital firms are targeting a wider range of clients, across all demographics.

While the tech-savvy millennial generation is the natural target for automated investment advice, baby boomers are another promising market. As they retire and switch from investing money to withdrawing money, they too will be eager to use their mobile devices and tablets to check their portfolio balance, withdrawals and fees at the touch of a button.

In addition, the greatest wealth transfer in history is currently underway as baby boomers pass along wealth to their heirs. This is creating more pressure on the traditional model, because the next generation of clients demands transparency, accessibility and seamless customer experience across all digital devices.

As of 2011, there are over nine million baby boomers in Canada, making them the largest generational client base. They are closely followed by their children – the computer-savvy Generation Y, or Millennials.

"Traditional firms willing to venture into automated and hybrid models will face challenges, but those willing to invest in digital will be able to engage clients across generations in a cost efficient way," adds Smith. "It's important to embrace the growing pains and invest the time and effort required to go virtual, as the reward will be worthwhile."

The digitization of investments services and advice coincides with the pressure companies now face to disclose more information than ever as part of Client Relationship Model Phase 2 (CRM2) regulations. These measures will have long-term strategic implications for wealth management firms – they need to look beyond the regulatory mechanics of CRM2 and focus on a comprehensive approach to improve the overall client-advisor experience.

To support discussion on the topic of innovation in wealth management, EY is also sponsoring the Canadian Funds Summit, which takes place in Toronto on May 12 and 13, 2015. Industry thought leaders and visionaries will come together for two days to share their insights on what's next for wealth management.

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SOURCE EY (Ernst & Young)

Erika Bennett, [email protected], 403 206 5157; Julie Fournier, [email protected], 514 874 4308; Sasha Anopina, [email protected], 416 943 2637