The rise of technology has altered how we live and do business, impacting all parts of the economy, including finance and wealth management. But as digital disruption advances, wealth managers are found to be “dangerously behind” the curve in adoption, overestimating their capabilities and underestimating the impact of emerging technologies such as robo-advisors, according to PricewaterhouseCooper (PwC).

In a new report, the consultancy firm explores expectations among high net worth individuals (HNWIs) for wealth management and their use of digital technology, and assesses attitudes to, and provision of, digital technology within the wealth management industry.

The findings of the report, based on survey responses from 1,000 HNWIs and interviews with 100 client-facing relationship managers who work in wealth management firms, suggest that there is a big gap between HNWIs’ expectations and wealth managers’ perception of digital technologies.

The research found that wealth management is one of the least tech-literate sectors of financial services; a trend that comes into conflict with HNWIs’ growing enthusiasm in adopting new technologies.

85% of HNWIs are using three or more digital services in their day-to-day lives, and yet, only 25% of wealth managers are offering digital channels beyond email.

Over half of HNWIs surveyed believe it is important for their financial advisor or wealth manager to have a strong digital offering – a proportion that rises to almost two-thirds among HNWIs under 45.

47% of HNWIs who do not currently use robo-advice services would consider using them in the future. Meanwhile, two-thirds of wealth relationship managers said they do not consider robo-advisors a threat to their business and repeatedly insist their clients do not want digital functionality.

Only 39% of clients would recommend their current wealth manager, highlighting the growing dissatisfaction. This figure decreases to 23% for US$10m+ clients. This weak affiliation to traditionally wealth managers is creating a sector vulnerable to fintech incomers, the report says.

“This conflict within wealth management firms, combined with a client-base that feels only weak affiliation to its chosen providers, is creating a sector that is now acutely vulnerable, to digital innovation from fintech incomers, including robo-advice services,” said Barry Benjamin, global asset and wealth management leader at PwC.

“Ignoring this state of affairs is not an option. If firms do not respond now, they simply will not survive in the medium to long term.”

To survive, PwC advises wealth management firms to accelerate efforts to adopt a comprehensive digital infrastructure that integrates every aspect of their activities and corporate culture, harness the potential of digital, and be willing to partner strategically with fintech innovators.

PwC’s ‘Sink or Swim: Why wealth management can’t afford to miss the digital wave’ report echoes another paper released two weeks ago by Capgemini that advises wealth management firms to explore partnerships with fintech ventures to ensure their long-term success.

Capgemini, which surveyed 5,200 HNWIs and 800 wealth managers, found that clients’ demand for automated advisory services, or robo-advisors, has risen to nearly 20% points over the last year, from 49% in 2015 to 67% in 2016. The report also found that the wealth management sector has been falling to exploit their digital capabilities including social media and mobile tools.

However, Capgemini said that wealth management firms were beginning to wake up to the digital gap issue, noting that several of them have been exploring accelerator programs to attract startups, partnering, investing in or acquiring robo-advisory companies.

Featured image: Robot by Ociacia, via Shutterstock.com.