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The digital maturing of high-net-worth individuals

Pandemic lockdowns in 2020/21 forced global economies into a downward spiral as they faced the potential collapse of emerging markets and unprecedented government stimulus packages. But stock market gains have seen many high-net-worth-individuals (HNWIs) actually increase their wealth in the last year.

In fact, the latest figures from Capgemini show that the world now has more than 20 million millionaires – a 6.3% increase in 2020 – with HNWI wealth growing 7.6% in 2020, reaching $80 trillion.

HNWIs (usually defined as those with liquid financial assets of more than $1m) have become more involved in their investments over the last 25 years, and now seek broader advisory support. They are more digitally aware and expect their advisers to be utilising the latest technology to support their investments.

A common misconception is that HNWIs, because they are often not classed as ‘digital natives’, are less comfortable with digital investment products, but HNWIs of all ages are actually more digitally savvy than many would expect.

A 2016 PwC survey showed 85% of HNWIs using more than three digital devices and 98% accessing internet apps daily. Clearly, even five years ago HNWIs possessed a high level of digital literacy, and this will only have accelerated as a result of the pandemic.

In contrast, many wealth management relationship managers dangerously overestimate their firm’s digital capabilities. Some rate their business as ‘digitally advanced’ when the only service offered to clients is a website.

What do HNWIs need from digital wealth management?

To understand what HNWIs expect from wealth advisers, it is important to consider their needs and how they behave. The following key needs have been identified across the market.

Collectively, they are family-driven – around a quarter will have inherited wealth and most will hope to transfer their wealth to descendants. Baby boomers (aged over 65) are estimated to pass down $68 trillion in wealth over the next 30 years, meaning that HNWIs are increasingly younger and more tech-savvy.  

In the UK (which has the fourth highest population of individuals within the top one percent globally) one in five baby boomers is a HNWI, which means that retirement is or will be a big concern. HNWIs’ wealth in terms of assets is held mostly in equities, cash and cash equivalents, fixed income and real estate.

Tax support can be a major concern for HNWIs. In 2009, the Organisation for Economic Co-operation and Development (OECD) decided to focus on HNWIs to increase tax compliance. Its report concluded that: “HNWI pose significant challenges to tax administrations because of the complexity of their affairs, their revenue contribution, the opportunity for aggressive tax planning and the impact of their compliance behaviour on the integrity of the tax system.”

One fundamental perception is that the wealth management of HNWI business is solely human-led – with digital only an adjunct – and should remain so.

In fact, HNWIs are no longer seeking passive solutions, but are increasingly interested in complex and self-directed investments, which enable a combination of automated and human interaction. These include hybrid advice models, modular financial planning services, hyper-personalised services and omnichannel connections with managers.

Environmental, social and governance (ESG) factors are also increasingly important, with HNWIs evaluating companies’ collective conscientiousness, particularly regarding environmental issues, before investing. They are also focused on achieving personal goals across different stages of life and factoring this into their investing with goal-based financial planning.
These solutions, with which the human and digital elements can be dialled up or down, suit the complex individual needs of clients, while also reducing operational costs for financial institutions.

Risk management, consolidated reports, and access to transparency in fees and specialists, are all key for HNWIs. And while digital interaction and real-time reporting are going to be increasingly high on their lists of ‘must haves’ going forward, direct interaction with advisers remains very important – 85% of HNWI polled in a recent survey said they valued the ability to talk with an adviser.

Positioning hybrid advisory to HNWI

So, for a consumer group used to quality service, how can wealth managers satisfy HNWIs’ heightened desire for digital investment at speed, alongside the bespoke service provided by a trusted adviser?

A hybrid and omnichannel approach is the answer. By 2024, 20% of wealth management engagement is expected to occur face-to-face, 15% by video conferencing and 25% via apps. By adding multiple customer support channels and chatbots, wealth managers can streamline communication with users across engagement points:

  1. Engaging the client online (e.g. by providing news, events, research data and access to portfolio information) rather than just developing self-service platforms.
  2. In an increasingly complex world, where a portfolio manager may, for example, have to evaluate more than 200 different investment products for a client, technology will be vital to keep the job both do-able and scalable for a growing audience.
  3. A hybrid approach where the adviser touchpoints can be dialled up and down depending on customer needs

Helping you help your HNWI clients

At Nucoro, we understand the importance of hybrid working for HNWIs and have recently partnered with a tier one private bank to build and launch a hybrid digital investment platform. Built on Nucoro’s wealth platform, it will ultimately enable the bank’s advisers to spend more time with their clients, while robotic process automation will drastically speed up the execution of data-related tasks including KYC and reporting.

If your bank would like to explore whether a digital investment platform could help you deliver services that add value to customers and keep them in your ecosystem, get in touch.

Key Ideas

  • Despite the pandemic, the number of HNWIs, and their net worth, grew in 2020.
  • HNWIs are demanding better digital experiences alongside face-to-face advice when it comes to wealth management
  • A hybrid investment platform with human touchpoints at key moments is the future of serving HNWIs