Robots may be replacing vacuum cleaners in the home, but people are still vital to the success of wealth management institutions and to the financial confidence of high net worth clients of all ages, this article argues.

Robots have their uses. Who knows, they can even be cute. It is premature, however, to argue that robots are going to replace humans in running clients' money, at least to the extent that is supposed in some of the more breathless accounts of new technology. So what should wealth managers and their clients think? CEB, a US-headquartered "best practice insight and technology company", examines the terrain. The article here is by Peter Delano, practice leader, CEB. This publication is pleased to share these views; we invite readers to respond with their feedback.

Whether we're in Johannesburg, London, New York, Singapore, Sydney, Toronto or any other financial services hub, my team and I at CEB get a common question: “What does the rise of new robo platforms mean for the wealth management industry?" This is usually followed by a question like: "So do I need to build my own, partner with an existing provider, buy someone or wait until this phase goes away?"

The short answer to these questions is that focusing on a digital channel for clients to use primarily without an advisor misses the point of what high-net-worth individuals and families really want, which is confidence that they are on track towards meeting their financial goals.

What high net worth individuals’ leanings tell us
In 2016, CEB surveyed 1,200 high net worth individuals across the globe and found that the majority are open to using automated investment management services, whether it be with their primary wealth management firm or an external robo-adviser. Clients at the lower end of the high net worth spectrum (£700,000 to 7 million) are most likely to mention cost savings as the primary reason they are interested in working with a robo-adviser.

Clients with more than £7 million in investable assets most commonly cite the improved online and mobile capabilities these advisors provide as the reason.

We then analysed various digital activities and their impact on customer loyalty. When we looked at customers’ likelihood to invest more, intent to stay with the current provider and willingness to recommend advisers to friends and family. We found that making clients’ lives easier by offering convenient digital capabilities does not have a meaningful impact on loyalty.

Clearly, robos shine a spotlight on the digital client experience through modern user interfaces, intuitive goal discovery tools, account aggregation, fast onboarding and on-demand reporting. Wealth executives most commonly cite improving customer access as the main focus of their digitisation strategy. However, making information access and transaction processing easier doesn’t provide enough impact to reverse decreasing client loyalty.

What we learned is that what people really want – more than a sleek interface and multiple access points – is confidence that they are on track to their financial goals. Our analysis reveals that an optimal digital experience that instills customer confidence increases wallet share by almost 9 per cent. Examples of high-ROI digital capabilities include allowing clients to review online checklists or questions to ensure typical goals are met, accessing specific “modular” financial plans digitally, and viewing interactive graphics that show the relative importance of their goals.

Advisors will stand out in digital world
Despite the interest in robos, our data shows clients of all ages want an integrated personal and digital relationship with their wealth provider. For example, for those respondents who were not interested in robo-advice, nearly two-thirds cite the value of in-person advice provided by their current advisor. If we add adviser involvement to a confidence-oriented digital experience, client loyalty increases by three times compared to offering just convenient technology.

The best-performing advisors complement the digital experience by creating productive tension with their clients, highlighting their firm's unique strengths and motivating client action without high pressure selling tactics that put the firm at regulatory risk. We call these high performers "wealth challengers", and while they make up only 10 per cent of the current advisory workforce, wealth challengers outperform their peers on revenue production, manager performance ratings and holistic advice delivery.

Moving the client experience away from aging web interfaces, limited mobile transaction options and paper-heavy face-to-face meetings certainly demonstrates a contemporary offering to wealthy clients who are more tech-savvy and interested in robo-advice offerings. However, those changes aren’t enough to make a difference in client loyalty. The bigger loyalty gains will come from an integrated personal and digital experience that motivates clients to take action and that builds confidence that they are on the right path toward achieving their financial goals.

Robots may be replacing vacuum cleaners in the home, but people are still vital to the success of wealth management institutions and to the financial confidence of high net worth clients of all ages.