Stiff competition from digital for mass affluent clients

14 August 2021

Providers are facing stiffer competition for mass affluent individuals as a number of digital players enter the market.

According to Global Data’s 2021 Financial Services Consumer Survey, the tendency among mass affluent individuals to opt for alternative providers is rising.

Sergel Woldemichael, wealth management analyst at Global Data, said: “In both Europe and the Americas, traditional banks, brokers and financial advisers are preferred by most mass affluent individuals. However, other options, from digital-only banks to new digital financial services providers, are certainly growing in popularity.”

In Asia Pacific, only 27% of those polled prefer to use traditional banks and building societies to manage new investments. The vast majority would prefer to have digital providers such as robo-advisers and big tech companies.

Woldemichael warned that traditional wealth managers can “no longer rest on their prior success” with clients, as digital providers offer more desirable customer experiences, personalisation, automation and continuous service expansion at a low cost.

There have been a number of examples of traditional players seeking to respond to growing demand for digital services, with JP Morgan recently purchasing Nutmeg and Barclays collaborating with Scalable Capital on a robo-adviser. However, GlobalData said more need to embrace this trend to remain competitive.

Woldemichael added: “Competition for the mass affluent demographic will continue to grow in the wealth management industry as new digital entrants and non-financial services providers make their mark. The Covid-19 pandemic is to blame for the acceleration of this, spurring digital uptake.

“All in all, only the strong will survive – and in this case, strong refers to those that can best cater to the mass affluent audience and meet their increasingly demanding digital needs.”

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Professional Paraplanner