Tech-savvy investors want digital solutions, but firms lag behind

NEW YORK Tue Jun 24, 2014 1:09am IST

A page from the Skype website is seen in Lausanne May 10, 2011. REUTERS/Denis Balibouse/Files

A page from the Skype website is seen in Lausanne May 10, 2011.

Credit: Reuters/Denis Balibouse/Files

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NEW YORK (Reuters) - Executives at top U.S. wealth managers say they need more technology to maintain their market-leading positions as younger investors seek to manage their money in a digital world, but research shows firms are not keeping up with client demands.

Many managers are more comfortable meeting face-to-face with clients. But a preference for video chat through services such as Skype is becoming more prevalent, especially with under-40 investors.

"As individuals have started using other full-featured applications for other purposes, they've grown to expect that level of sophistication from everyone, including from their [wealth management] providers," Brent Beardsley, North American asset and wealth management leader for Boston Consulting Group, said in an interview.

Between 40 and 60 percent of wealth management clients want direct wealth manager contact via video chat, but fewer than 20 percent of banks offer these services, according to BCG's 2014 Global Wealth Report. More than 60 percent of clients want investment recommendations and portfolio analysis delivered online, on both web and mobile applications. But only half of wealth management firms offer these services, the June 9 report said.

Millennial investors, a broad group generally under the age of 40, drive most of this demand. Nearly 77 percent of high net worth individuals under 40 conduct most or all of their wealth management functions through digital channels, according to the 2014 World Wealth Report from Capgemini and RBC Wealth Management. In five years, that is expected to jump to 82.5 percent.

Demand also has increased because older investors have become more tech savvy, Beardsley said.

But video chat, interaction via social media networks and automated portfolio analysis and simulation remain limited.

Greg Fleming, president of Morgan Stanley Wealth and Investment Management, said a "fair amount" of the company's $500 million annual technology budget is for client interactions. A recently launched mobile application that allows clients to deposit checks by uploading pictures from their phones is just the beginning, Fleming said.

"We're not looking to just catch up." he said, "We have the scale where we should be the best in technology."

Morgan Stanley plans to introduce a revamped online experience in early 2015, with enriched portfolio reporting, bank and cash management and data visualization features to help clients understand their investments.

TD Ameritrade Holding Corp executives said mobile orders averaged 13.4 percent of the firm's daily trading volume in the first quarter, up about 50 percent from year-ago levels. The brokerage is upgrading its order-taking systems and building out a video chat function.

Some are concerned the growth of digital solutions will make advisers less relevant to a younger generation of investors. Others are more sanguine about the future.

Frank Porcelli, a managing director at BlackRock Inc, the world's largest asset manager, said he isn't worried about financial advisers becoming obsolete.

"People talked about WebMD," said Porcelli, who heads BlackRock's retail business. "But when you're sick, you actually go see your doctor."

(Reporting by Michael Leibel; Editing by Tim McLaughlin and Leslie Adler)

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