We often hear advice to avoid herd mentality, but when it comes to Merrill Lynch’s approach to technology and wealth management, it’s time to follow the thundering herd.
Some 85% of Merrill Lynch’s clients in its 10 million plus cohort are digital adopters. That number may raise a few eyebrows. What does it mean to be a digital adopter? Could baby boomers really be embracing digital options? Surely the digital move must be led by millennials, or even those with fewer assets and less cumbersome needs.
Believe it or not, that’s not the case.
Kabir Sethi, head of digital wealth management for Merrill Lynch and Bank of America Private Bank, says that digital adoption has been closely correlated with the amount of assets the clients have with the firm. Both post and pre-Covid-19, digital adoption was highest among ultra-high-net-worth baby boomers, defying the misconceptions that millennials are leading the demand for digital options.
“At first blush, that’s a bit counterintuitive because you feel like people in that cohort don’t really do stuff themselves,” Sethi says. But that assumption may show us how our preconceived notions about technology in wealth management needs to change. As an industry, we often think that digital and self-service are interchangeable concepts, Sethi says. That is not always the case.
Self-service is an important and attractive part of a digital offering. Clients do like using the apps and websites to check their balances or trade. But this is not just about giving them their own power. “There’s an increasing appetite for collaboration,” says Sethi. Investors like having the option of walking through their portfolio with their advisor to get real time feedback. “It’s just a much easier experience, and, frankly, a lot more secure,” says Sethi. With the help of digital options (in this case a phone call and an online portal), there’s no need for regular conference room meetings. Clients can provide feedback more quickly. That creates a more open, collaborative relationship between the investor and advisor that may not have been possible in the past. Who wouldn’t want that?
It may also come as a surprise that the age “gap” in digital isn’t that much of a gap. “This is one of those myths where younger people use apps and older people don’t,” says Sethi. “It doesn’t really play out like that. If I showed you the chart across the age groups in digital adoption, it’s a lot flatter than you would expect.”
Baby boomers may be invisible to many tech marketers, but the older generations are just as reliant on technology as millennials. According to marketing company Zen Media, boomers spend an average of 27 hours online per week. Some 39 percent of boomers consider themselves to be early adopters of technology. Or look at the study from payments company ACI Worldwide that found that the older generation prefer digital tax refunds more often than millennials and Gen Xers. Boomers were also more likely to pay their taxes in cash. Baby boomers also proved savvier when it came to phone, email and identity theft scams.
Ultra-high-net-worth individuals and older clients generally have complex needs. For them, digital offers security, aggregation and simplified reporting solutions. “The whole point, even in our business, is not wanting clients to go digital as much as giving them the option to deal with us in whichever way they want,” says Sethi. Some clients may want more interactions with their advisors in certain areas, while manually doing some tasks. Others may rely heavily on the digital options, using them to share information with family members as well. Either way, advisors can use digital options to meet their needs.
Some of the resistance to digital adoption in the past came from security concerns. Phones can be stolen or lost, as can laptops. But mobile apps offer security that mailboxes cannot. Physical copies of documents present a whole realm of issues that digital can solve. Now, investors are demanding more from their wealth manager and are sometimes steps ahead of their advisors. High-net-worth and ultra-high-net-worth clients are naturally digital. They’re mobile, traveling and using technology for their daily lives, so thinking about them any other way is outdated. “Three years ago, the number one ask from clients was about texting. ‘Why can’t I text my advisor in a secure environment? Why do you keep telling my advisor he or she can’t text me?” says Sethi. A secured text feature for advisors and clients was introduced in 2018.
The sheer number of clients using digital portals should be a sign that investors want more. The digital adoption is an opportunity for wealth managers to provide content and guidance for their clients as well. Sethi says that high-net-worth and ultra-high-net-worth clients have a huge appetite for content, much of which they are reading through their Merrill Lynch and Bank of America Private Bank portal. Clients know that the information coming from their advisor is vetted and reliable- a huge comfort in the era of fake news and click-bait headlines. Wealth managers can then provide content that is targeted and personal. This is particularly important as a lot of content, shared through social media platforms, is still geared toward younger investors. The breadth of content can still be expanded and optimized.
The Covid-19 pandemic has of course provided opportunities for wealth managers to push digital adoption further, and they should be sure to take advantage of that. Sethi says that he has seen levels of adoption in six months that you would expect to see in five years. Banks around the world are seeing increased digital adoption. Boston Consulting found during a retail banking survey in May that one in four customers will stop using bank branches once the pandemic is over.
Investors still expect a high level of contact with their advisors, and in times of uncertainty that need for contact grows. With the pandemic happening, even those who were reluctant to embrace digital approaches have been forced to hold meetings over video calls and share information digitally. People have accepted remote interactions through technology to the point that financial advisors are courting new clients and onboarding them remotely.
As digital adoption nears 100 percent, the focus on adoption will slow, but the need for digital answers will not. The pandemic has shown us where the wealth management industry still lags and how digital communication and technology platforms need to be constantly updated and engaged. Now is the time for wealth managers to focus on the areas of their digital approach that have been lacking. Chances are, your baby boomer clients need some more digital love.