COVID-19 Ushers Changes to Investor Behavior and Surfaces New Opportunities for Providers

November 18, 2020 — Boston

Providers that seize the chance to revamp product and tech offerings will be best positioned for long-term success

Investors, especially those younger than age 50, express significant interest in expanding their advice relationships and in using a variety of product solutions. In response, providers must decide how to prioritize the development of their offerings, according to the latest Cerulli Edge—U.S. Retail Investor Edition.

Cerulli’s findings show that 22% of respondents expect to increase their advisor reliance. Projected increases varied widely from a high of 40% among those in their 40s to only 9% among those in their 70s. Expectations regarding the use of automated online investment services and budgeting apps followed a similar pattern. In both categories, investors under age 40 expressed elevated interest that grew among those in their 40s before declining rapidly among older cohorts.

“These results underscore the importance of establishing advice relationships with investors in their 40s, in many cases before substantial wealth accumulation,” says Scott Smith, director of advice relationships at Cerulli. “Prospective clients in this segment are desperate for help in sorting out their competing financial priorities but draw little interest from traditional advisors unless they accumulate substantial assets,” he adds. In many cases, firms have sought to fill this void with digital tools, which serve ably on investment portfolios but lack the emotional connection and customized advice investors seek on the other financial quandaries they face.

Given the limitations under COVID-19 lockdowns, within the banking segment, millions of consumers took their first steps into digital banking, only to find that mobile check deposit was a huge upgrade compared with visiting a branch or ATM. “While online-only challenger banks have been making a stir in this segment for a decade, it seems possible that the intersection of COVID-19 and traditional wealth management providers’ interest in adding cash management to their core services could restructure the segment relatively quickly,” says Smith.

Among transactional payment options, respondents express the highest interest levels in contact-free credit cards (40%), with at least 35% of respondents in each cohort under age 70 sharing this view. Cash rewards credit cards garner the next-highest level of interest at 29%, with the highest levels of interest among respondents under age 50. “In their pursuit of securing their position as investors’ sole source of financial product, adding partnerships with credit and payment providers is a logical step for traditional wealth management providers to round out their suite of services and create additional value,” comments Smith.

In aggregate, these results offer a range of opportunities for providers in the wealth management segment. The biggest challenges for providers are remaining top-of-mind among investors in times of need and assuring that they have a true path of least resistance to onboarding clients. “By rounding out their product and service offerings, either internally or through partnerships, providers can better serve their clients and limit attrition by clients seeking more comprehensive platforms,” he concludes.

Note to editors

These findings and more are from The Cerulli Edge—U.S. Retail Investor Edition, 4Q 2020 Issue.

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