The global digital divide, defined as people who have never used the internet, is 2.9 billion, representing 37% of the world’s population, according to the UN’s telecommunication agency. Notably, internet users increased by an astonishing 17% since 2019, with the pandemic driving a huge shift online referred to as the “Covid connectivity boost.”
In wealth management, a growing number of clients, including digital phobics, have become increasingly comfortable with digital interactions including video meetings, e-signatures, online transaction reporting and a wide range of personal apps. Every indication suggests this trend will continue, and our industry needs to dramatically accelerate our digital maturity to keep pace.
Traditional wealth management has often been characterized as a digital laggard, challenged by an increasing regulatory agenda, legacy technology and an aging workforce. Industry leaders view the digital divide as an opportunity to reposition and differentiate their firms to respond to the shifting expectations and demographics that are underway.
Clients who may have been reluctant to leverage digital technology are converting rapidly, and early adopters are expecting better online experiences. According to a global survey of 800 high-net-worth investors conducted by Aon and FactSet, only 27% of respondents gave their wealth managers top marks for digital experience. Overall scores for client satisfaction with digital solutions ranged from 7.1 to 7.6 out of 10 across global geographies, indicating opportunities for improvement.
Most experts view the future of wealth relationships as a hybrid mix of physical and digital interactions. While this is good news for the traditional wealth industry, we know that clients of all demographics expect better online experiences for those aspects of the relationship that are more effectively delivered digitally. Firms that are unable to deliver this hybrid balance will risk landing on the wrong side of the digital divide.
The regulatory agenda since 2008 has often been cited as one of the primary challenges preventing firms from making digital investments. In ThoughtLab’s recent Wealth and Asset Management 4.0 research report, digital compliance ranked last among 12 advanced digital developments. Firms that rely on analog and human processes to remain compliant will continue to be industry laggards as it is virtually impossible for advisors and firms to remain compliant without leading digital technology.
The biggest demographic trend facing our industry is the intergenerational transfer of wealth, estimated at $1 trillion between 2016 and 2026 in Canada. Studies indicate that 88% of the gen-Xers and millennials inheriting this wealth do not plan to stay with their parents’ advisors or firms. Experts recommend a range of strategies that advisors can employ to reduce or eliminate this massive risk, and, not surprisingly, technology adoption tops the list. Advisors and firms must offer digital client experiences that meet the same standards as the apps their younger clients use every day. Channel preference — which may not be digital for every aspect of the wealth interaction — must also be supported.
The mindset of the firm is also a vital ingredient for digital wealth leaders. Teams that understand technology, language and the behaviour of the new client demographic will ensure firms remain comfortably on the right side of the digital divide.
David Reeve is CEO of InvestorCOM Inc., a compliance technology provider to the wealth management industry.