Partner Article

Less than 20% of consumers consider wealth management providers for large investments

The explosion of new app-based investment services has opened up a wealth of options for investors, but professional wealth management services are being overlooked in favour of consumers turning to family and spouses for investment advice, even though digital services have made access to professional investment management more accessible than ever.

An independent survey of 1,200 UK consumers commissioned by the provider of digital banking solutions CREALOGIX found that over 41 per cent of Millennials turn to family for investment advice ahead of any other service or option. Only 30 per cent of the respondents across all generations identified banks as somewhere they would go for investment advice, and 19 per cent identified wealth management services as somewhere they would approach, despite the growing range of new apps and digital services offered by banks and wealth managers designed to help people invest.

The survey found that younger people seek investment advice from a more varied pool of sources. Among Millennials nearly 50 percent have chosen family as a source of investment advice, compared to 25 per cent turning to their existing banks. This trend inverts with age, with the propensity to ask family members for advice dropping to 22% among baby boomers, and 35% of them opting to ask their bank.

Selected by 19 per cent of respondents of all generations, wealth management services are not the most popular first port of call for investing a windfall.

The reasons for this general reluctance to engage with traditional wealth managers may stem from the negative impressions many consumers hold about the industry. When asked what they associate with “traditional City of London wealth management”, 19% of consumers surveyed called the industry “elitist”, while 18% believed it was “old-fashioned”. Surprisingly this sentiment was most pronounced among Londoners: 30% believed the industry to be “elitist”. Negative sentiment persists among higher earners as well: 35% of people earning over £75,000 picked the term “elitist” to describe traditional City wealth management.

Jo Howes, Commercial Director at CREALOGIX UK, said: “There appears to be a misconception that bank savings accounts are the best safe choice for big investments, which is untrue. Wealth management services are falling behind in educating their clients about other low risk investment options which have a better chance of protecting savers from the effects of inflation. Risk-averse, long term savers are just one of several market segments where wealth managers have the opportunity to compete more proactively with banks to attract new consumers and their investments. By educating people about how to make smarter use of their money, the wealth management sector can regain trust and reputation. Digital wealth management technology offers wealth management firms a great new set of opportunities for engaging consumers and helping them manage their money better.”

Millennials responding to the survey were twice as likely as Generation X to say they would invest via an app. According to CREALOGIX it is the younger generations which hold a promise of fresh market for wealth management firms, if they can bring to market more accessible digital products to compete with bank savings accounts.

Says Anton Zdziebczok, Head of Product Strategy at CREALOGIX UK: “Providing digital wealth management services allows established firms to appeal to younger generations and gain much better scalability as they onboard new clients. Financial institutions don’t need to build everything in house. There’s plenty of expertise on hand in the UK, once wealth managers commit to a digital strategy. With the ecosystem of specialist software providers and fintechs expanding rapidly thanks to the open banking movement, there’s never been a better time for wealth management firms and financial advisors to reinvent themselves.”

The independent study was undertaken by Censuswide between 26th-29th July 2018. It interviewed 1,200 consumers aged 16 and above.

This was posted in Bdaily's Members' News section by Crealogix .