Wealth managers make up one of the least tech-literate sectors of the financial services industry, a recent report by PwC has found.

Only a quarter of wealth management firms offer digital channels beyond email. This is in stark contrast to two-thirds (69%) of high-net-worth individuals (HNWIs) who use online/mobile banking. More than 40% review their portfolio or investment markets online and more than one in three are already using online services for portfolio management.

The report, Sink or Swim: Why Wealth Management Can’t Afford to Miss the Digital Wave, is based on quantitative research with more than 1,000 high-net-worth individuals in North America, Europe and Asia with at least $1 million in investable assets and qualitative interviews with 100 relationship managers, CEOs of wealth management firms and fintech innovators.

Read on for insight into why wealth managers need to accelerate plans to adopt technology and be willing to partner with financial tech firms to help do so. (For related reading, see: Who Wealthy Clients Pick to be Their Advisors.)

Tech Demand Among HNWIs

The demand for finance-related technology among HNWIs is similar across younger and older generations. The exception is portfolio management. Those under 45 years old are much more interested in managing investments online. Almost half (47%) of those who do not currently use robo-advisors would consider using them in the future.

More than half of HNWIs surveyed believe it is important for their financial advisor or wealth manager to have a strong digital offering. This proportion rises to almost two-thirds among HNWIs under age 45 and in Asia. Where HNWIs are digitally confident, expectations that wealth managers should be technologically proficient are even higher.

Falling Short With Technology

The report maintains that wealth managers appear to be oblivious to their technology inadequacies. Some even overestimate their firm’s digital capability, rating it digitally sophisticated when the only service offered to clients is a web site. Wealth management globally, at best, is in the very early stages of the first ecommerce-focused wave, PwC points out. But very few firms have automated and digitized back office and administrative functions. Just one in 10 uses social media with clients and many are only now investing in web portals and basic mobile apps.

Two-thirds of wealth relationship managers do not consider robo-advisors a threat to their business. They repeatedly insist clients do not want digital functionality, which contradicts the importance their clients place on it. (For related reading, see: How Wealth Managers Can Bridge the Digital Tech Gap.

What Rich Investors Want

When asked to assess what they value most about their advisor/wealth manager, technical capabilities and digital offerings ranked only eight out of 11 options. Only 39% of clients are likely to recommend their current wealth manager. This falls to just 23% among clients with $10 million in assets.

“This conflict within wealth management firms, combined with a client base that feels only weak affiliation to its chosen providers, is creating a sector that is now acutely vulnerable, to digital innovation from fintech incomers, including robo-advice services,” Barry Benjamin, global asset and wealth management leader at PwC, said in a statement.

“Ignoring this state of affairs is not an option. If firms do not respond now, they simply will not survive in the medium to long term,” he added. (For related reading, see: RIAs: Top Priorities and Challenges for 2016.)

Survival Tips

In order to survive PwC recommends that wealth management firms:

  • Step up efforts to adopt a comprehensive digital infrastructure that integrates every aspect of their activities and corporate culture, from the back office to how they service clients and market to new prospects.
  • Harness the potential of digital technology to realize greater efficiencies, manage costs and advance their core client proposition by drawing on a much wider range of available data.
  • Firms should also be willing to partner with fintechs to deliver technological solutions at the speed the market expects.

The Bottom Line

Wealth managers are dangerously behind the curve in the adoption of digital technology. What they offer is in stark contrast to what their high-net-worth clients expect and want. Firms that want to survive will need to accelerate plans to adopt technology and be willing to partner with fintechs to help do so. (For related reading, see: A Shakeup Is Coming for the Advisor Market.)