HNW Clients Warming Up To Digital Advice

HNW Clients

By Jeff Schlegel, FA-mag.com – Digital financial advice isn’t just for the young and/or people with low asset levels to invest. According to a recent study by research and consulting firm Cerulli Associates, high-net-worth individuals, including a smallish but decent percentage of those over 70, are interested in using digital platforms.

When Cerulli first looked at the digital financial advice market in 2015, it found that thirtysomething investors were the most enthusiastic about digital advice relationships, while those over 70 were least interested. Cerulli found that the strong negative correlation between age and interest in digital advice persisted when it revisited the topic again in last year’s third quarter, but also saw there’s growing interest in digital advice among older investors in the upper income tiers.

In its report, “The Cerulli Edge—U.S. Retail Investor Edition, 1Q 2018 Issue,” the researcher found that more than one-quarter of investors over 70 who have $2 million to $5 million in investable assets said they would consider online-only engagement. Beyond that, high-net-worth investors in general seemingly are more receptive to digital advice platforms.

In 2015, Cerulli found that 38% of investors with investable assets of $2 million to $5 million said they were willing to engage with digital providers. Last year, that number jumped to 46%. And among investors with $5 million-plus in investable assets, those numbers went from 30% in 2015 to 38% last year.

The upshot, says Cerulli director Scott Smith, is that higher-net-worth investors are getting more aggressive in adding to their total number of advisory relationships, including digital, as a form of provider diversification.

“It’s not much of a threat [to financial advisors] because high-net-worth investors tend to use multiple advisors,” he says. “I think they’re reluctant to keep all of their eggs in one basket.”

Instead, Smith adds, it speaks to the need for advisors to tailor their offerings to the preferences of their clients. For the purposes of this report, clients or potential clients fell into two camps: online enthusiasts and traditionalists. The former cohort seems to be an obvious candidate for digital advice services, but Smith says advisors shouldn’t assume the traditionalists will thumb their nose at digital platforms. Rather, he says, it makes sense to incorporate digital platform features that address the concerns of those approaching, or in, retirement.

Smith notes that some of the larger broker-dealers are expanding their own digital capabilities to enhance their portals in order to meet client demand for online financial and wealth management services. Meanwhile, a number of digital platforms that started as robo-advisors aimed at the consumer market have gone to the B2B model by providing digital technology to enable financial institutions and traditional advisors to offer digital advice to their clients.

“This will result in a full-service set that will be available for all of an advisor’s clients, where they’ll choose how much to interact with it,” Smith says. “I think in 10 to 15 years we’ll see that robo platforms of some sort will be part of everyone’s service model.”