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The Wealth Management Model of The Future

Firms are continuing to look for ways to better control the client experience. Here are some of the key issues they need to think about if they want to compete.

Less than a decade ago, a phone call was the primary way a client interacted with their brokerage. But today, as online and especially mobile channels continue to grow, banks have a unique opportunity to evolve the way they serve their clients and ensure they retain them in an ultra-competitive environment, according to a new presentation by research firm Aite and Scivantage.

Online tools are more crucial than ever: Almost 40% of investors aged 57 and older view an online brokerage firm as their primary provider. Further, 44% of Gen-X and Gen-Y investors surveyed by Aite last year shifted assets to another investment firm or switched investment providers due to the availability of online tools. Younger investors tend to trade via mobile devices, with 49% of Gen-Yers surveyed by Aite trading on an iPhone, followed by 25% on an Android.

Still, around 40% of young investors still consider a bank to be their primary investment provider. And only 20% of young investors consider an online brokerage firm to be their primary investment provider despite their strong adoption of online trading, Aite’s research revealed.

As such, firms are continuing to look for ways to better control the client experience. A hybrid approach is key, since research shows that overall investors want control over their investment decision-making and online trading but they also value expert advice. “Someone might say I want to take 10 percent of my portfolio and manage it myself. If there’s a benefit to doing it, Gen X and Y will do that. If not, they will go to another advisor,” says Joe Stensland, executive vice-president, product and delivery management, Scivantage.

The difference, he adds, is that previously people might have seen it as you’re either fully advised or self-directed. “In reality in the hybrid model, consumers are both. They choose where to get their advice.”

Today, advances in technology have made it easier, cheaper and quicker for banks to have an integrated offering that is comparable to an online brokerage. The mental hurdle is often the bigger barrier for firms, says Alois Pirker, research director, wealth management at Aite.

There is a growing opportunity for smaller firms, adds Stensland. “They’re realizing it’s not such a big mountain to climb. We’ll see more regional names with a real opportunity to compete.”

Further, while firms believe they have to compete with E*Trade, Schwab or Fidelity, who have more than a decade of experience in building an integrated platform, that is simply not the case, says Pirker. “ What’s key is that firms need to think about how to differentiate themselves, not how to imitate.”

Some of the critical questions banks need to ask themselves include, “What are your key assets and how do you align them?” he explains. “It’s about enhancing your unique assets, rather than getting rid of something and comparing yourself to someone else, who might never catch up.”

Meanwhile, the way of the future is definitely mobile: with over 1 billion smart devices expected to be sold in 2013, mobile technologies will have the biggest impact on the wealth management industry over all other technology areas, Aite and Scivantage’s research confirmed.

Among online brokers, mobile trades have grown 50-70 percent from year-end 2011 to the end of 2012. The biggest impact of all for the wealth management industry is expected to be tablet use by a sales force, followed by mobile access by clients.

Melanie Rodier has worked as a print and broadcast journalist for over 10 years, covering business and finance, general news, and film trade news. Prior to joining Wall Street & Technology in April 2007, Melanie lived in Paris, where she worked for the International Herald ... View Full Bio

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