A study predicts that high net worth people will make far more use of digital communications in the medium term but these channels will add to, and not replace, more traditional methods.

A new study has predicted a significant uptick in high net worth individuals’ use of digital communications channels in the medium term, adding to a growing body of research validating the wealth management industry’s heightened investment in this area.

The Futurewealth Report: Stepping into the Communication Age, which was published jointly by SEI, Scorpio Partnership and Standard Chartered Private Bank, found that 35 per cent of the HNW individuals surveyed expect to be using digital communication tools “much more” in five years’ time.

But while HNW individuals’ use of digital communication channels, like social networks and instant messaging is set to rise, the report’s authors add the caveat that this will be supplementary to, rather than replacing, traditional communications such as face-to-face meetings and telephone calls. Indeed, of the 3,500 HNW individuals surveyed around the world, 26 per cent said they expect to increase their use of traditional communications channels over the next five years.

Benefits, concerns

Looking more closely at HNW individuals’ communication habits and attitudes, the study found that respondents expect to increase their use of digital communication channels due to a wide range of benefits they offer, namely efficiency, ease of access, connectivity, flexibility, and value for money. With social networking specifically, 70 per cent of those polled particularly appreciate the fact that this offers connections with multiple people, while 51 per cent cited “ease of use”.

But while social networking has many pluses, those surveyed are clearly concerned about possible security risks as just 18 per cent said they associate “security” with social networking. The launch earlier this week of Facebook’s new Graph Search “smart search engine” has of course put the issue of data privacy in social networks firmly back in the spotlight.

As might be expected, 62 per cent of those involved in the Futurewealth study said they associate security with face-to-face meetings with their advisors (higher than for any other communication method). Just as predictably, 81 per cent cited “visual contact” as benefit offered by traditional meetings and 78 per cent like the “personal touch” they deliver. 

The Futurewealth series of reports examine the attitudes of the world’s up-and-coming wealthy individuals, and those surveyed have an average net worth of $1.9 million. Interestingly, the study seems to suggest that respondents’ level of wealth correlates to how reliant they are on digital communication channels – possibly in part due to the greater value for money they offer. For those respondents with a net worth in excess of $4 million, digital communication methods will be “added channels”, while those with less than $500,000 reported that they will soon rely mainly on the internet and email, the study’s authors said. As such, digital communication channels need to be a priority for wealth managers of all stripes, whether they are targeting those established in the upper echelons of wealth or those still coming through the ranks.

“The world’s wealthy have a strong appetite for technological advancements, despite security concerns and lack of true personal connection,” said Al Chiaradonna, senior vice president of SEI’s Global Wealth Platform. “This group will continue to integrate digital tools into their communication habits, including how they interact with their wealth services providers, and they expect institutions to follow suit. Long-term success in this industry will hinge on delivering a scalable, multi-channel communication strategy with security and privacy safeguards that meet with client expectations. Companies that provide that type of client experience will truly take command of the market.”

Studies advocating greater engagement with digital communications have been coming thick and fast in recent times, and are a part of a wider move by the wealth management industry to upgrade its technology capabilities. A recent study by Cisco, for example, found that 57 per cent of wealthy US investors under the age of 55 would consider moving a portion of their assets to a firm that offers video interaction with advisors and other experts if their current provider did not.

While many of the firms publishing such studies of course have a vested interest in promoting technology investment, the “digitalisation” of wealth management internationally is an inexorable trend on many fronts, ranging from the growing number of mobile apps available through to increasingly customised and sophisticated reporting formats.