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As providers seek to become their clients’ all-in-one financial hub, they must be poised to offer services at key inflection points in the evolution of clients’ needs
June 2020, BOSTON—Over the last decade, there has been a seemingly endless discussion about the potential for disruption in the wealth management segment. Although technology has provided important gains to process efficiencies, the more important evolution in this space is the growth in complexity of individual clients’ financial lives and maintaining path-of-least-resistance access at key inflection points, according Cerulli’s latest report, U.S. Retail Investor Products & Platforms 2020.
Many stakeholders in the financial services segment bet that adding digital services for the emerging investor market would pay off in improved differentiation and increased assets. Yet, adoption by self-directed investors—measured by investors who report to use a variety of information sources to make their own investment decisions—has been relatively stagnant. From 2006 through 2019, this segment tracked steadily at approximately 37% plus or minus 4% on a year-to-year basis. “Providers have launched waves of digital offerings expecting to gain assets from emerging investors, only to find their solutions ignored or slightly misunderstood by clients,” according to Scott Smith, director of advice relationships.
Despite flat adoption rates, providers’ desire to become a client’s all-in-one financial hub is grounded. According to Cerulli’s research, more than 55% of affluent investors indicate that they would prefer to work with one institution that can fulfill the bulk of their financial needs, which can reinforce the value of the provider’s services and increase client retention. However, just 27% of those who said they were interested report actually doing so—an adoption rate that is consistent across wealth tiers.
A general lack of awareness of the breadth of services available at each of the service providers and lack of clear comparisons between various platform offerings are key blocking issues. “Clients can be frustratingly myopic in their perceptions of providers. This reinforces the benefits of maintaining ongoing top-of mind awareness or offering services at key inflection points in the evolution of their needs,” according to Smith.
For financial providers, this means having the optimal products available to key prospects as they recognize their need for additional solutions. “Individual investors’ financial lives have grown increasingly complex. Each current and prospective client is running an internal algorithm, balancing each of the inputs they consider important,” says Smith. “Providers must seek to pave the path of least resistance, determining which variables they are believe are most powerful when establishing their core client value proposition and highlighting them appropriately.”
NOTES TO EDITORS:
These findings and more are from The Cerulli Report—U.S. Retail Investor Products & Platforms 2020.
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