Wealth managers miss unique window to attract younger clients

Results from Aon’s second client experience syndicated benchmark show that wealth management firms performed well despite the considerable pressures of the 2020 environment, with only marginal declines in key performance indicators (KPIs). 

That said, a pronounced year-on-year drop in the net promoter score (NPS) — a standard proxy for client loyalty and propensity to refer — underlines the looming challenge of converting good client experience scores into net new revenues in the months ahead.

With responses from more than 8,000 high-net-worth (HNW) clients of 12 UK private banks and wealth managers, collectively representing assets under management in excess of £200bn ($282bn), the Aon research provides an independent lens on how well the industry fared in 2020. 

Critically, our dataset offers the pre- and crisis-era view by benchmarking 2020 results against 9,000 responses received from 10 participating firms in 2019.

How should the results be interpreted by firms as they chart a course back to profitability and growth? Here we examine five key insights that have emerged, and what they mean for the wealth management industry.

1. Key performance indicators dropped marginally across the board

While many have labelled 2020 a year to forget, it is remarkable to consider the pressures endured by firms, including (but not limited to) a complete switch to remote working, the accelerated adoption of technology to facilitate communications, and managing the impact of the pandemic on clients’ financial and retirement plans.

Our data suggest that firms rose to the challenge well, with good top-line scores; metrics such as overall client satisfaction, client outcomes and relationship manager satisfaction were only slightly impacted by the crisis, compared to 2019. 

Reassuringly, some of the best scores received for client journey were received by firms were at higher-frequency touchpoints, such as day-to-day management and portfolio reviews.

These results — achieved while undertaking a wholesale shift to virtual client management — should give the industry confidence to accelerate its digital transformation, rather than attempting a reversion to the past.

2. Client loyalty has dropped, especially among older clients 

The outlier to this positive story is the headline NPS, which fell from 46 per cent in 2019 to 38 per cent in 2020.

The NPS is a key metric of client loyalty used across multiple consumer industries. The score for UK wealth shows that, on the whole, clients are loyal and there is a readiness to recommend a given firm to family, friends and associates; however, that propensity has declined since the Covid-19 pandemic.

Our analysis indicates that all KPIs are highly correlated to NPS, which means that even small changes on the margin at various points in the client experience can result in a significant impact on NPS. Looking closer at the 2020 results, it is older clients (over the age of 75) who have contributed most to the decline in NPS.

This is significant because this cohort generally tends to be the most positive about their wealth management providers as they enjoy stable financial trajectories. However, in 2020, the gap between this group and the rest of the client base narrowed considerably, impacting the NPS. These clients might have benefited from proactive reminders that financial advice and planning remained available to them, despite the disruption of the pandemic.

3. Female clients consistently provide higher scores than men

Although women only comprised 30 per cent of the overall respondent base, there is a clear trend that they have more positive perceptions of their wealth management providers than their male counterparts. 

Female clients gave higher average scores on all 14 KPIs than male clients in both 2019 and 2020. This even included awarding a higher average share of their investable assets to their primary providers.

Rather than drawing generic conclusions about female client behaviour, it is important for each firm to segment their data carefully and understand the client journey moments that could have the most profound impact on satisfaction, loyalty and assets for all types of clients.

4. Generating new client referrals should be a business priority

Our profiling data reinforces the argument that firms should now be strongly focussed on how to boost client referrals and generate new revenues. Consistent with findings from before the crisis, the typical wealth management client is aged 68 and has partnered with their primary firm, on average, for 11 years.

Firms may have missed a unique opportunity to proactively attract younger clients, many of whom got into the market for the first time last year to take advantage of volatility, and have instead opted for low-cost portfolio builders.

As clients rethink the timing of their retirement as a result of the crisis, and with the baby boomer dissaving transition underway, generating new referrals will be key to attracting new revenues. A thorough NPS segmentation, linked to an effective referral strategy, can help firms convert good feedback into business results.

5. Communications is an area for further improvement 

Anecdotally, marketing leaders tell us that lockdowns initiated a vast, refreshing experimentation in digital communication, resulting in more frequent and varied client contact than before. 

So, it may have been a surprise to see the overall score for communications dip slightly, and fewer firms receive top marks, compared to 2019.

Good communication is closely aligned to NPS, underlining the critical client role played by marketing, and while scores have held up well, they are still the lowest rated touchpoint on the client journey. 

Further refinement is needed in terms of relevance and tone, as well as personalisation to the level of financial understanding and interest of the client.

Take-home messages

The most forward-looking firms will go beyond using client insights to simply validate their existing approaches.

Instead, clients should be treated as stakeholders, with client experience data offering structured feedback to diagnose the gaps relative to expectation. Some firms are already using multi-annual programmes to track progress on major new initiatives, such as developing sustainable investment propositions, enhancing their digital capabilities or experimenting with new content ideas.

With a good set of scores, the wealth management industry should feel confident about the year ahead even though it will seem, for many months, like a continuation of what has come before. An agenda of competing priorities will, however, force some prioritisation, and it is here that benchmarking can help identify the improvements that will drive satisfaction, referrals and revenues. 

Caroline Burkart is associate partner, and Tasha Vashisht is head of thought leadership development, both at client insight, Aon