The use of independent advisers and independent advisory firms in Australia is expected to surge over the next three years, by 73 per cent and 93 per cent respectively, according to EY.
New research from the accounting firm has found 40 per cent of Australian clients plan to switch their wealth providers in the next three years, a considerable increase from 13 per cent changing providers.
The EY 2019 Global Wealth Research report said the increase in switching is being driven by new digital solutions, changing digital habits and evolving client values as well as the royal commission powering the rise of consumer and regulatory scrutiny.
No sole provider is able to meet respondents’ varied needs, EY said, with many clients currently maintaining relationships with more than five different types of providers.
The upswing for independent advisers is in line with global trends, however the increase in Australia is significantly higher than in other regions, the research noted.
Australians may be seeking out independent practices for flexibility in solutions and attractive fees, but EY added that the swell in business may be due to public and regulatory scrutiny of the wider sector during the royal commission.
“There is the potential for a significant movement across the Australian wealth management landscape over the next few years, as clients look for providers who can better meet their evolving needs,” Antoinette Elias, wealth and asset management leader, EY Oceania said.
“The impact of the royal commission adds an additional layer of complexity to a sector that is already facing intensified competition among both incumbents and new market entrants.
“In this environment, wealth managers will need to continuously raise the bar when it comes to satisfying client demands.”
Wealth managers who can understand and deliver on what matters most to their clients, such as major life events, will be best positioned to succeed, Ms Elias added.
However, Australian clients were reported more likely to trust they are being charged fairly and to understand how their adviser is compensated, compared with other clients globally.
Around 71 per cent of Aussie consumers said they have full awareness and understanding of wealth management fees, with transparency being noted to play a significant role in the relationship.
The research found percentage of AUM and hourly support are currently the most common payment methods, although fixed fee models are the most desired.
“Australian wealth managers recognise their clients now expect more than just strong investment performance, but they are struggling to differentiate and communicate the value of their offerings and services in an increasingly crowded market,” Ms Elias said.
“The answer is not simply in lowering fees, but rather a combination of increasing transparency and predictability in pricing models, and equipping advisers with ways to communicate value beyond investment returns.”
The EY research indicated digital channels are evolving faster than wealth managers and their clients anticipated three years ago.
In-person and phone interactions are declining as a preferred primary communications channel among Australian wealth management clients, down from 35 per cent in 2016 to 22 per cent in 2018, and projected to fall below 10 per cent in the future.
Around half (47 per cent) of Australian respondents now prefer mobile apps as their primary engagement channel for wealth management, compared with just 12 per cent in 2016.
Looking at emerging technology, although only 2 per cent of respondents in Australia prefer digital and voice-enabled assistants as a primary channel, 20 per cent said they would prefer this channel in the future.
Digital assistants saw the most future demand for receiving advice, at 32 per cent of respondents.
“As wealth managers prioritise their digital investments across multiple channels, they need to consider how client engagement may evolve in the coming years,” Ms Elias said.
“This could mean reallocating budgets from websites to mobile apps and voice-enabled services sooner than planned, and capitalising on hybrid models where clients have access to both digital tools and human interaction.”
The percentage of Australian respondents to use fintechs for their wealth management needs is expected to increase by 53 per cent in the next three years, significantly higher than the forecast rises in the Asia-Pacific region (22 per cent) and globally (19 per cent).
Although fintechs have relatively low levels of assets under management currently, the report said that the number of respondents using the new entrants is on par with those using long-established wealth institutions.
The government is finally delivering on its budget promise to remove the $450 per month superannuation guarantee threshold. ...
ASIC has revealed a major focus over the next 12 months will be to identify and pursue “opportunities for smarter regulation”. ...
Fidelity International has committed to halving emissions from its investment portfolio by 2030 and has set deadlines for the phase out of thermal c...