Where should wealth management focus when it comes to digital strategy?

David Newman

“Financial institutions have a newfound urgency to update their technology.”

Whether it’s to connect with millennial investors, compete with robo-advisors, attract the next generation of advisors, or comply with new regulation, firms of all sizes are allocating more of their 2017 budget towards digital tools. When deciding where to allocate resource, however, it is important to breakdown the wealth management journey in to stages and understand which component parts to digitalise and to what extent. Naturally the focus and extent varies from firm to firm and depends on their business model and strategy but there is potential improvement in, what I see as, the five key stages; acquisition, onboarding, advising, implementing and reviewing. Reading a recent article from L2 “ ‘investors aren’t finding wealth managers on google’, however, highlighted the extent of the problem in the ‘acquisition’ stage.

There has been lots of discussion about the threat of robo-advice in Wealth Management.  Digital Wealth Managers (robo-advisors) leverage technology to automate some, or all of the investment process. Not only does this reduce costs but it appeals to millennials predisposition of ‘do it yourself through an app’. However, robo-advisors still digitise the entire client journey and the importance of the human aspect in Wealth Management (certainly at least the advising and reviewing stages) therefore limits the threat robo-advisors can pose to the industry on a systemic basis. Despite this, clearly there are lessons to be learnt from this new breed of digital wealth managers. Aspects such as improving onboarding processes should largely go without saying to anyone who has ever opened an account but one of the more interesting discussion points is around  the use of digital technology for client acquisition.

As an industry that prides itself on the personal touch, some may initially be dismissive of how much a role digital strategies can play in the wealth management industry. Furthermore, we all know that most sources of business for wealth managers still comes from referral and this prospect flow has the best conversion rates. Hannah Shaw Grove’s research (conducted with Private Wealth editor-at-large Russ Alan Prince) reveals that roughly 85% of individuals with net worth’s exceeding $20 million said they found their advisor by referral.

Even Digital Wealth Managers, who we would suspect to be at the forefront of digital acquisition strategies, have come under fire for their high customer acquisition costs. However, this is relative, and more reflective of their low life time value of clients due to small account sizes. Allen Miller at ETF Strategy has quoted a robo-advisors client acquisition cost at £180 per account. This is poor unit economics when chasing £5,000 accounts at 75bps but vastly different for traditional wealth managers who can embed digital client acquisition strategies with a little bit more leeway on cost due to the client sums involved.

The importance of a digital presence in converting offline sales should also not be understated. When most people buy a car offline, they will do online research before they walk on to the forecourt to buy. There is no reason why this isn’t true of a wealth manager. The conversion of referrals is far more likely if the brand (and, crucially, the advisor) has a strong online marketing strategy. Even those cold emails and calls are more likely to get positive traction if there is a reputable online persona to back it up. 

Yet still, the wealth management industry struggles with basic areas such as showing up on search results.  According to the article by L2, a digital research firm, Wikipedia is the top web destination for wealth management-specific terms such as “401(k)”.

Trying even a basic search of “Wealth management Cardiff” and “Private Banking Manchester” some of the major players in these markets are missing from the first two pages of Google yet Lombard Odier, which doesn’t have a presence in either, is one of the top results. Not a single financial advisor appears if I search “What to do after I have sold my business”. This is not just about paying for adwords but also search engine optimisation (SEO) which can be done organically through keywords, keyword analysis, backlinking and linkbuilding.

According to the L2 artice, the only brand that made it into the Top 10 results on a range of terms was Fidelity investments, with 12.8% of first-page results on Google searches. Evidently there are some lessons to be learnt from Fidelity.  Not only is there a plethora of current news information such as a daily market review, latest news section, news analysis, newspaper round-up and US election section but there are pages dedicated to answering industry related questions.  For example, ‘What is a trust?’ and ‘What is an investment fund?’. These may seem obvious but many wealth managers are not even making these basic steps to be present online in the places where potential clients are; and certainly not where they are when they are considering their financial affairs.

Embracing a digital approach that is online, mobile, social, real-time and 24/7 is, in my view, an important component of a client acquisition strategy in wealth management. Using SEO, increasing visibility and providing engaging content that prospects care about (not just what we think is interesting) should serve as a relatively low cost component of embedding digital in to the client journey. Our industry needs to leverage technologies and strategies in the same way that counterparts have in other industries and becoming more present online is a logical first step to form part of a wider digital strategy.

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