The future financial well-being of the mass affluent market

19 Pages·2017·6.1 MB·English

The future
financial
well-being of
the mass
affluent market
Better serving the UK mass affluent
segment
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| Introduction
“While this demographic continues to We recommend a prioritization of service
improvements and offerings focused on
trust banks and financial institutions, customer needs
Help your customers:
to really connect, we need to focus
► Optimize their financial well-being
on their financial well-being.” ► Manage or pay off their debt
► Buy a home and pay off their mortgage faster
► Plan for their children’s schooling
► Save for retirement
► Manage inheritance issues
The UK’s Office of National Statistics The shifting financial landscape, following the Retail customers bring to their selection of financial service digital capabilities. Organizations wanting to engage with this segment should
(ONS) confirmed in 2018 that the UK We began this research with the following Distribution Review (RDR), is exposing an increasingly providers and advisers have changed. aim to develop purpose-led financial management services
Additionally, regulatory change creates new
mass affluent demographic continues wealthy but underserved customer segment in the UK. This provided cost-effectively through digital channels.
assumptions: Our research results indicate that the vast majority of the opportunities for financial services providers to deliver
to grow and to thrive*. Yet the segment mass affluent demographic is an attractive opportunity
newly mass affluent have little or no idea who to turn to digital products that help mass affluent customers We believe organizations should work together with mass
remains underserved by financial services for financial services providers. Yet it poses a number
when they realize they need help managing their finances. understand their options and build a powerful affluent customers both to co-create and to mature their
providers. ► Mass affluent consumers in the UK (those with more than: of strategic challenges. It has become difficult to cost-
They frequently lack the financial skill, confidence and time relationship to their personal financial well-being — one service offerings in order to meet their needs in new,
£100,000 personal income, or £150,000 household income effectively address the mass affluent segment and to use
In this report on The future financial well- to engage in what seems like very complicated planning and which goes well beyond the transactional nature of innovative ways. There are many interesting observations
or £100,000 in fluid assets) do not have cost-effective, robust digital technology in a way that truly meets their needs. In
being of the UK mass affluent market we management activities to understand their options and set many digital financial services today. and insights within this report. I really do hope you find it
options for the financial advice they need. some cases, businesses struggle to create and innovate realistic financial goals. In the absence of understanding
asked “how can we engage efficiently with useful and stimulating and look forward to any feedback
this previously underserved customer?”, ► Retirement planning, inheritance planning, pension consolidation new business models or to co-create with their customers to and direct access to advice, this new audience is reaching We believe that wealth managers should focus on you care to share.
and home ownership are important factors for their financial ensure that their needs are front and center in proposition out to peers, colleagues and social media for direction, helping customers develop a better understanding
in order to enable providers to better
development. leading them to engage with financial advisers instead of of their financial life. Wealth managers should aim to I would like to thank all those who have contributed to
success.
serve the mass affluent segment.
approaching larger organizations/providers directly. give customers choices they have never had before the creation of this report and my team at EY-Seren and
RDR has driven financial advisers further up-market to
From customer advocacy as a tool to ► In many cases, consumers in this segment struggle to make and make it easy, intuitive and secure for customers to EY for making it possible. And finally, the mass affluent
focus on high net worth (HNW) customers, as overt fees While this demographic continues to trust banks and
engage new customers, to retaining complex decisions about their financial future. manage their financial needs at their own pace. customers who participated in our research and shared
deter smaller investors from engaging. financial institutions, to really connect, financial services
the existing ones with digital solutions ► Many consumers have limited time, skills, or do not feel urgently providers need to focus on the financial well-being of mass With the rapid growth in FinTech investment, we expect with us their financial experience and needs.
strategically tailored to their needs, we compelled to address their financial planning. At the same time, mass affluent consumers continue to affluent customers. That requires understanding each adoption of FinTech products to increase to 50% by
have delved into the world of wealth and become increasingly self-service orientated. In part, this is customer’s specific financial goals and helping them make 2020** and open banking and PSD2 will increase Peter Neufeld
asset management from the mass affluent ► Many traditional financial institutions are trying to understand because the current service models and advice channels well-informed financial choices. customers’ ability to share data with providers. Partner | Ernst & Young LLP
how technology can be used to more cost-effectively address the
customer perspective. do not meet their needs. Additionally, all age cohorts These amount to urgent and compelling reasons for Head of FS Digital Customer
needs of this segment. have become significantly more digitally engaged and Our clients have an opportunity to offer highly personalized Experience EMEIA
traditional financial institutions to invest in their online
services and innovative new customer experiences with Head of FSO EY-Seren
empowered. With this, the expectations that mass affluent
customer experience.
their access to customer data, real-time analytics and new
*ONS “Wealth In Great Britain Wave 5: 2014-2016,” 1 February 2018, [online] ons.gov.uk 3 **EY FinTech Adoption Index, 2017
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| Index
| Background ...............................................................................................6
| Five key insights .........................................................................................8
| Further findings .........................................................................................9
| The analysis ............................................................................................11
| The delay ..........................................................................................12
| The trigger .........................................................................................16
| Seeking advice ..................................................................................20
| Simplifying .........................................................................................24
| New investment decisions ..................................................................28
| Contact us ...............................................................................................33
| About EY-Seren .......................................................................................35
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| Background
Research objectives
Our survey definition of the mass affluent market:
Our aim was to understand the habits and behaviors of the mass affluent in the UK
► How do mass affluent consumers plan for and make complex financial decisions? ► When they are thinking about their finances, what information are they really looking
for and where do they expect to find it?
► How do they set financial goals?
► What brands do they trust to be part of their financial life and what do they expect
► Who do they ask for financial advice?
from them?
► What tools do they use?
► What triggers them to look for assistance and how can wealth management
► What role does digital play in their financial life? providers intercept the signals at the right time?
► How often do they come together with the people in their lives that matter most to ► How can wealth management providers be more relevant to their customers’
discuss financial matters? financial lives?
more than more than more than only
£100,000 £150,000 £100,000 UK residents ► How many people in this segment have financial plans and are actively planning for ► What do these customers expect from their wealth and asset managers at different
retirement and other financial goals? stages in life?
personal income household income in investable assets 256 surveyed, 32 interviews
► How often do they check the progress they are making? ► What opportunities exist for larger financial institutions for a direct-to-mass
affluent proposition?
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| Five key insights | Further findings
1 Affluent families have little time to make 3 Customers will engage with a service that can take their 5 Digital enablement correlates with increased
The experience of financial tools
financial decisions overall financial well-being into account financial literacy
online, via mobile apps and websites,
Affluent households are busy households. Most struggle to find the time to fully A range of life events trigger mass affluent customers to seek help with wealth More consumers in this segment are using digital tools to engage in is seen as crucial in developing the
understand, create or regularly review a financial plan. Less than one out of management, typically as a family. Most recognize that their finances are their financial lives than ever before. And with that comes new demand financial well-being of customers.
Researching for financial information
three (32%) say they engage in creating and reviewing their financial plans “at complex and the risks and opportunities are too complex to define alone. They for financial institutions to provide engaging, meaningful digital
is becoming more frequent. Financial
least every couple of months.” Many expect to pay for advice, but choosing a are typically not seeking specific product advice, but a vantage point from which experiences that go beyond simple transactions and help customers
institutions need to provide relevant,
credible adviser or meeting regularly demands time. to assess their overall financial position, to inform their priorities. navigate the complex decisions and activities across their financial lives.
personalized and jargon-free
As customers are becoming more digitally enabled and gain confidence
information to their customers.
Enhance your digital channels to encourage engagement and regular Deliver a clear, thorough health check for their financial well-being to they are becoming more financially literate. However, we can do more Experiences of new banking mobile
establish trust and increase engagement. to support them in this area. There are new opportunities to use digital apps have made the newly mass
financial planning.
technologies to engage and support the financial planning activities of affluent hungry for more transparency
the newly mass affluent. from their other savings and
investment providers. New technology
2 People turn to the recommendations of family and friends 4 People value a consolidated overview of their financial Use measurement and analytics to understand their needs and and analytics can deliver transparency
when making financial decisions progress, in one place where they are on their financial journey. and control, efficiently, for customers.
There are certain points in their journey
People seek advice from trusted sources, usually family or friend People want advice to be tailored to them, and want the relevant data
of seeking financial advice where
recommendations, as they begin to engage in this process. Recommendations consolidated into a single view to make their life easier and to help
human interaction remains crucial.
are more important for younger investors, those with dependants and those who them understand the overall picture. This is fueled by a desire to arrange their
Digital automated advice is highly
live off their investment income. Experience, age and complexity are factors that affairs and consolidate family investments.
valued but face-to-face contact still has
lead people to seek advice and recommendations.
an important role to play.
Create products and services that are personalized and that give a
Support the peer recommendation process with readily shareable content. Financial advisers who do not have the
consolidated view.
answers or appear to be pushing the
products that they are most familiar
with is off-putting for customers.
There is a notable gender gap and
consequent opportunity for our clients
to engage and empower mass affluent
women in financial decision-making.
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| The analysis
Our research findings have been set out in sections that highlight and reflect moments in the
journey that a mass affluent customer experiences when managing their financial well-being. We
begin by exploring some of the reasons customers in the segment are less engaged with their
financial planning. From there, we follow their insights and map their journey to full engagement
with, and management of, their investments and financial relationships. All graphs and charts
represent the findings from our survey respondents. Each section contains quotes from our
interviewees and additional views expressed by them in the opening narrative of each section.
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“W e would like to be able to do all of this on our own,
| The delay
but with such a complex family to manage we simply
Action points
do not have the time to achieve the level of knowledge
required to successfully invest on our own.” ► Be active in helping busy, affluent families
plan their financial future. Find ways to prompt
conversations and provide digital solutions that
(Female, 36) make it easier for them to discuss their financial
position and needs within their family.
► Provide support that is simple to access but rich in
actionable insight. Save your customers time and
frustration.
► To build engagement, offer tailored or
The delay personalised information and propositions.
Especially for women, to build engagement with
this decisive but underserved segment.
► Highlight your focus on delivering efficient and
effective solutions and accessible support as a key
The delay
message when engaging with new customers.
Our respondents report that lack of time is a critical frequently with financial planning than men. It may be,
factor in explaining low engagement with planning for example, difficult to take up financial planning as a
their financial well-being. Many of the respondents couple when partners are not equally engaged in their
have dependants and full-time working commitments. financial well-being, or for couples who are not used
to budgeting or discussing money in detail together.
However, many of our respondents have spent
Equally, their investments may be too scattered or
time researching investment options and show
complicated to fully grasp.
considerable awareness of various financial
products available. Consequently, they delay their financial planning.
This indicates that, in addition to time, they may lack Our qualitative research confirms that some find
confidence in their ability to make a fair assessment reviewing their position via a financial adviser onerous
of their financial position and in making the “right” and time-consuming. In fact, these respondents
decisions to benefit them. prefer digital solutions — a finding that correlates with
our clients’ needs to find innovative ways to engage
Our research also shows that women engage less
efficiently with this segment.
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| The delay: in depth
“W e both have demanding jobs
and a busy family life, so we
don’t have as much time as we’d
Most households struggle to find the time to create and regularly review their financial plans, with only 32% able to do so “every couple of months.” The most
like to plan for the future.”
typical way of checking financial investments is via a website (61%), followed by a financial adviser (online 28% vs offline 39%), and 12% say they check their
investments via a mobile app. Notably, women are less likely to check their financial investments as frequently as their male counterparts (27% vs 49% check “at
(Female, 60)
least weekly.”) More must be done to engage with women.
How often do people engage with, or review How often do people check the progress of Where do people check their financial investments?
their plans? their investments?
88% 39% 28% 12% 61%
68% of respondent mass affluent investors do not find
“at least every
the time to engage or review their financial plans
couple of
(including savings goals) “every couple of months.”
months”
36%
Who checks “at
”at least
least weekly”?
weekly”
Who creates or reviews their financial plans at least
every six months?
3%
Younger investors (under 45) ”Never”
69%
Via my Via my Online via Online via
Older investors (45+ years) financial financial a mobile a website
52% adviser (offline) adviser (online) app
27% 45%

All graphs and charts represent survey findings.
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| The trigger
Action points
► Review how your business responds to inquiries
from existing and potential customers in which
similar trigger events are discussed. Do you
routinely ask what prompted contacts?
► Prepare digitally accessible information that is
related to common challenges in wealth transfer
experiences for mass affluent customers, such as
inheritance tax planning.
► Review your website’s search engine optimization
The trigger (SEO) performance against searches relating to
such trigger events. Are customers being exposed
to your solutions in the right way? Do you need to
renew your content?
► Consider whether and how your business might be
The trigger
able to anticipate or detect these trigger events in
While there is a general increase in consciousness Other common trigger-points include: a customer’s life and provide relevant and timely
and urgency as people get closer to retirement age, content to them.
► An additional asset tipping the balance on
our interviewees cited that a trigger event is often a the urgency of gaining a simpler view of the ► Analytics can help financial institutions
motivator to act. It is these trigger events that often portfolio — especially where a couple look at their understand and respond to their customers’
highlight confusion with, and complexity of, financial individually held assets and recognize a need needs. Offering personalized and relevant financial
investments. to consolidate. advice is important to this segment.
Trigger events vary between respondents. Some ► The loss of a parent and the need to resolve the
“M y mother died and she had a
in the demographic are becoming affluent, having estate’s financial affairs.
been customers of large institutions when they had place in Spain that I wanted to
► A divorce requiring the resolution of shared assets
fewer assets and less reason to engage directly — for
and investments. sell. Her finances were a mess
example, with a pension scheme operated by their
► Concerns for their health, or their peers’,
employer. Their view of their existing providers and it made me get an IFA.”
prompting a re-evaluation of household finances.
is generally favorable — that they are reliable and
trustworthy — but usually not where they expect to ► Changes in the circumstances of the children of a (Male, 52)
source more sophisticated, tailored advice. marriage — for example, where parents may begin
planning to assist a child with a mortgage deposit.
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| The trigger: in depth
The more able investors are to engage with digital technologies and platforms (digital skills) the more access to financial information they have. Our In addition to improving financial knowledge and skill, we found that the relationship between digital
research shows that survey respondents with more advanced digital skills also had better knowledge of financial products and services (financial skill level and financial literacy level impacts on the frequency that people check their investments. The
literacy) that impact on their financial well-being. Make your customer’s financial planning less daunting by helping them to be better prepared and more advanced their digital skills and financial literacy the more regularly people check progress.
more knowledgeable. Enable them to take advantage of digital tools to improve their financial literacy.
What is the relationship between digital skills and financial literacy? Who is more likely to check their financial progress weekly?
Respondents with advanced financial literacy
52% 13%
44%
of respondents have of respondents have
Respondents with entry-level financial literacy
advanced digital skills entry-level digital skills
27%
of respondents with of respondents with
advanced digital entry-level digital Respondents with advanced digital skills “I changed jobs and set up yet
skills also had skills also had
76% 3% 43% another company pension, so I
advanced advanced
thought it was time to sort it out.”
financial financial
Respondents with entry-level digital skills
literacy literacy (Male, 61)
28%
“ One of my old school friends
died and it got me thinking about
retiring early.”
All graphs and charts represent survey findings. (Now retired male, 71)