The threat of BigTech firms moving into wealth management is keeping business figures awake a night, a survey shows.

Giant technology – aka “BigTech” - firms such as Google and Alibaba pose a serious threat to established wealth management businesses, but high net worth clients still value human contact despite the digital revolution, a survey finds.

Capgemini polled 2,500 HNW individuals across 19 wealth markets in North America, Latin America, Europe, and Asia-Pacific. The survey data is included in the 2017 World Wealth Report. Its data from wealth management firms, meanwhile, showed that 78.3 per cent of them see BigTech providers as a competitive threat.

Some 64.2 per cent of HNW individuals are highly confident that BigTechs will improve efficiency in wealth management, and 54.4 per cent expect such disruptive firms to make the business more transparent. 

Recent years have seen a flurry of interest around so-called robo-advisors, which use automated systems to calculate, for example, how a portfolio should be set up after information about risk appetite and other points are fed in. A number of banks, such as UBS with its SmartWealth offering, have invested in, or developed, robo-advisory models of their own to avoid being overtaken by industry upstarts. DBS, the Singapore-headquartered bank, for example, has worked with IBM’s Watson cognitive computing team to develop new services harnessing such ideas. In the US, prominent robo-advisors include Betterment and wealthfront, to name just two. The ascent of e-commerce players such as Google and Alibaba has also prompted thoughts of how they could push into finance; Alibaba, for example, already has its own wealth management brand in China, Ant Financial. 

Among other findings, the report found that hybrid advice models that mix digital tools with human interaction are being given just as much credence by clients as other wealth manager-led offerings. Such a result suggests that predictions of a big shift towards purely robo-advisory models might be unfounded.

The report said firms most overhaul business models and accept that traditional ways of operating no longer fit the bill. The use of digital technology should be part of the advisory process to help win clients and retain old ones. The report found that 71 per cent of HNW individuals are more likely to consolidate assets with their primary wealth manager if hybrid advice is on offer.

Another take-away from the report is that wealth managers must keep abreast of technological development like voice interaction and artificial intelligence. 

“Firms can jumpstart their hybrid journey by focusing on transformation related to people, processes, and propositions,” Anirban Bose, head of global banking and capital markets at Capgemini, said. 

There is still a big role for human advice. According to the report, HNW individuals are most likely to use the hybrid advice model once a wealth-management relationship is well established. At the first stage of the relationship, when financial goals are set out and risk tolerances set, nearly two-thirds of those surveyed said they were more likely to rely on face-to-face interaction with a wealth manager. 

The big jump to the hybrid model only comes further along the life-cycle, when performance reporting comes into play; at this stage, 42.7 per cent of respondents would like to engage with both man and machine, against 37.5 per cent who would still prefer purely human engagement. 

The report said strategic transformation is needed in everything from the core advisory model to client segmentation and marketing. Hybrid advisory services have not been implemented in most cases, and firms were given an average score of 2.7 out of a possible 7 on this aspect.