How Digitalization is Disrupting Customer Loyalty

Topaz Editorial Team Topaz Editorial Team

Change comes to even the most conservative of industries. Wealth management firms are finding it harder and harder to retain their customers. According to EY, one third of clients have switched providers or moved assets in the last three years; and another third plan to in the coming three years. This piece will look at the stats and factors that shape customer loyalty in wealth management in 2021, including onboarding, personalization, and high-touch solutions

Customer Loyalty Metrics and Factors

There are two co-dependent factors affecting customer loyalty: opportunities presented by digitalization and an empowered customer base that increasingly demands bespoke investment advice. There are some global variations. In China, new digital wealth management solutions are tempting HNWIs to jump ship. Meanwhile, a study of Belgian HNWIs indicated that new and improved approaches to onboarding negatively impact customer loyalty. As a result, as many as up to 45% are actively looking for new providers that meet their needs. They place great value on transparency and high individualization of services. There has been a softening of the old maxim that it costs five times more to win a customer than to retain one. Digital has made it a little bit easier to win one; and a little bit harder to retain one.

It’s worth looking at the customer loyalty demographic metrics in wealth management, too. In bad news for incumbents but good news for disruptors, wealth has a negative correlation with loyalty. Or, put simply, the richest clients—and thus the most profitable—are also the least loyal. Clients in the Ultra-HNWI category are 7pp more likely to switch than the typical HNWI at 39% compared to slightly more than a quarter of individuals in the high-net-worth category. (The Mass Affluent category bucks this trend, however, falling between the two in terms of likelihood to switch). The fickleness of the ultra-rich is therefore a call to action for the wealth manager to invest in the kinds of technologies that drive retention. If they don’t, disruptors are waiting in the wings to take their choicest clients.

Another factor that influences loyalty is (perceived) knowledge of the client. Clients who feel they have a solid grasp of investing can better appreciate the value that a wealth manager provides, contributing to loyalty. At 20%, customers who consider themselves possessing of “in-depth knowledge” are much less likely to consider moving assets than the average HNWI. On the flipside, 40% of customers with low investment knowledge consider moving assets in the next three years.

The Third Wave of Digitalization in Wealth Management

Back in 2014, PWC outlined a cross-industry theory of developing digitalization. The first “wave” is simply online retail; the second sees companies leverage data to offer individualized services; and the third customers are “helped by trusted intermediaries to access and control their own data.” With each wave, innovation increases, and the relationship between client and provider becomes tighter, driving higher loyalty.

At the time of writing, wealth management was early in the second wave. In 2021, we are into the third wave, characterized by a 360-degree view of the customer’s assets, behaviors, and goals. Concierge services come into play, as well. A full-embedded, high-touch digital experience is the current gold standard.

How Onboarding Impacts Customer Loyalty

Onboarding is the term for the process of integrating and familiarizing a new client with a company’s services. In wealth management, this can be an extensive process. Traditionally, onboarding a wealth management client has entailed product selection, completing regulatory checks, and opening new accounts.

A manual process, completing the required paperwork can be time-consuming for the provider and frustrating for the client. One survey found nearly a quarter of new account applications experienced NIGO (Not In Good Order) notices, which need to be returned and fixed before an account can be opened. And as onboarding represents the first interaction between client and provider, a poor process can leave a bad first impression. 

Onboarding is important because it plays a critical role in customer loyalty in wealth management in 2021. The frustrations around onboarding are a notable barrier to provider-switching, suggesting that a company that can offer a slick onboarding experience can expect to tap into the niche of frustrated clients who only stick with their provider due to the sheer hassle of moving.

Digital solutions can accelerate onboarding. At a basic level, digital onboarding makes sending and signing documents simpler, but other uses include integrating with KYC (Know Your Customer) and AML (Anti-Money Laundering) solutions; checking if documents are in good order; reducing redundant data entry; and integrating with investment proposal software.

Effect of Personalization on Customer Loyalty

A common theme in the rise of fintechs has been the empowerment of the individual investor. Services have sprung up that allow investors to invest according to their personal philosophies, such as their ethics on sustainability and equality. As a result, wealth management clients have come to expect high levels of personalization in the services delivered to them, with personalization becoming a key factor in satisfaction metrics. The study of Belgian HNWIs found that they value services that demonstrate understanding of their private needs. Meanwhile, 90% of wealth managers have replaced their client segmentation with a persona-based approach.

This is still an area where firms have work to do: Satisfaction among high-net-worth individuals towards their wealth manager’s personalized services is low, with more than 60% reporting unsatisfactory experiences. There is a clear incentive to get this right: 44% of HNWIs cited a positive experience with personalized services as having a powerful, positive effect on their perception of the company.

Personalization feeds back into the previously mentioned education-loyalty complex. A digital solution can serve a client with information pertinent to their investments, including advice, news, and a full view of their portfolio. Together, these pieces of information can provide the client with a deeper understanding of their portfolio, and by extension the value provided by the solution.

Impact of High-Touch Solutions on Customer Loyalty

As a general rule, the more frequently a customer uses a company’s services, the more committed to that company they become. For instance, Google’s product strategy is to have its products embedded in the daily fabric of the customer’s life. They can check the news with Google News, plan their day with Calendar, travel to work with Maps, manage emails with Gmail, and so on. Once part of the Google experience, it can be hard to extricate oneself.

This should be the goal of the digital wealth management solutions provider. A customer that can use one app for investment advice, news, portfolio management, concierge services, financial planning, and payments and banking, and contacting their wealth manager, among other things, will be loyal to that app.

A digital solution is an ideal way to reach the idealized “hybrid approach” to wealth management—a digital experience with a human touch. Hybrid models tend to attract the kind of client that engages the relationship manager about life events, which are often triggers to switch providers. Relatedly, they also attract better-educated investors, which as we have discussed, tend to be more loyal.


In some ways, nothing has changed: customers will remain loyal to firms that can meet their needs. Studies have shown that digital customer experience has a positive relationship with customer satisfaction, while customer experience has a positive impact on customer loyalty.

So what’s changed is what customers want. It is clear that the individual empowerment of the investor is driving the shift in wealth management. An investor wants personalized advice, deep information delivered in an easily digestible way, and solutions that reflect their outlooks and philosophies. Increasingly fidgety, the HNWI is willing to engage with firms that offer painless onboarding. And taking lessons from industries further down the digitalization road, keeping them engaged with a high-touch solution drives loyalty further.