Transformational change sweeps wealth managers as they reconfigure to win back client trust: PwC

Jul 10, 2013, 07:00 ET from PwC Management Services LP

Will women and millennials transform the wealth management industry?

TORONTO, July 10, 2013 /CNW/ - Despite the resurgence of global wealth to nearly pre-2008 levels, the wealth management industry is facing significant margin pressure caused by stringent and costly regulatory requirements, uneven growth across geographic markets, loss of certain types of fees and subdued client activity. These dynamics are further compounded by shifting demographics and existing challenges around operations, technology, and talent management. According to a new report from PwC, surviving and succeeding in this environment requires changing to a more consultative business model that places a premium on "doing the right thing".

"Wealth managers need to be innovative and proactive if they are to rebuild public perception and gain higher levels of client confidence and trust," says Raj Kothari, PwC's National Asset Management Leader and GTA Managing Partner. "Wealth managers must demonstrate how they are doing the right thing, including putting the needs and interests of their clients ahead of simply maximizing profits. This will require a behavioural change among producers, distributors and the advisory community."

PwC's 2013 20th Anniversary Global Wealth Management Survey found that wealth managers are failing to capitalize on intergenerational and gender opportunities. In particular, the industry needs to become more sophisticated at understanding the values of their millennial and female clients, and develop propositions aligned to those values.

Petrina Dolby, Senior Advisor of PwC's Canadian Wealth Management Consulting practice says, "Our research shows that millennials are more involved in their wealth creation and management, regardless if they are first, second or third generation wealth holders.  They will change jobs more frequently, put a greater emphasis on flexibility in how and where they work, have increased life expectancies and care deeply about their broader communities using social media as a matter of fact tool."

She continues, "Most strikingly, millennials feel very strongly that they are not being listened to by the wealth advisors of their parents.  This puts them as a flight risk."

Dolby also says that women continue to be an increasingly important, empowered and wealthy client demographic but again, this growing segment does not feel empowered in the wealth management space. Only 8% of PwC's survey respondents consider gender when segmenting their client base.

"Women tend to outlive their male partners and stand to gain control of wealth through not only their own efforts but also through inheritance and divorce," says Dolby. In addition, women are gaining more seniority as business leaders and are often the decision makers in next generation wealth transfers within family groups, having close relationships and contact with the next generations.

Dolby says, "Wealth managers need to better understand the different networks of influence which younger generations and female clients rely on for decision making, including that access to the matriarchal side of the family can provide great connections to the next generation."

"To be successful the industry must develop offerings that address the unique characteristics of the demographic reality, which requires going back to the basics of understanding the unique needs of your client."

Regulation will continue to play a greater role in driving choices for wealth managers deciding where to concentrate their activities across clients, propositions, products and servicing models.

Compliance replaced reputation as the top risk management concern in the survey, as wealth management firms struggle to keep pace with the scale, speed and costs of current and planned regulatory change. The cost of compliance will continue to rise, with respondents forecasting that risk and regulatory compliance expenses will account for 7% of annual revenue in two years, up from 5% today.

The survey noted an unprecedented level of frustration among senior executives who are finding themselves increasingly challenged to keep up with not only the business as usual pressures, but increased compliance and scrutiny.

"The industry is struggling with challenges around a combination of major external changes. The future will be less about providing products and services and more about delivering solutions and advice. Trust, reputation and brand will all play a greater role in client propositions and perceptions of value," says Kothari.

For more information, or for a copy of the report, please visit:  A copy of the report is also available from the media contacts.

For more information about PwC's Asset Management practice, please visit:

About the PwC Global Private Banking and Wealth Management Survey
PwC's 2013 Global Private Banking and Wealth Management Survey reflects the changing industry landscape and adds our own point of view to provide the global wealth management community with an independent framework, to guide further analysis and thought around how to evolve business today to better serve the needs of clients tomorrow.

The report surveyed 200 institutions from more than 50 countries with a host of different operating models and businesses across all segments of global wealth management. Participants' combined responses yield a fascinating self portrait of global wealth management both now and into the coming years.

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SOURCE PwC Management Services LP