Social media: Evolving the client-wealth manager relationship

Social media and the client-wealth manager relationship

Social media is changing the way clients approach wealth management.

Chairman of KPMG New South Wales and National Sector Leader, Insurance

KPMG Australia


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The internet continues to be the most disruptive innovation of our time. Baby Boomers increasingly are getting on board; Gen-Yers have always embraced web-based technologies since their beginnings; and so-called ‘Digital Natives’ have only known a digitally interconnected world. A new era of ‘social inclusion’ – in which social media and technology open the market to those who have never invested in it before – is looming.

Shift in the balance of power

The industry relied on the expertise and personal reputation of its wealth advisors, who demonstrated investment knowledge and addressed specific client needs. Social media and widespread internet availability now provide instantly available knowledge. Clients are able interact with wealth managers (and vice versa) in ways that were not possible 10 years ago. There is a shift in power away from wealth management professionals and toward the wealth management consumer?

In 2013 for example, activist investor Carl Icahn tweeted his announced purchase of Apple stock. This simple social declaration went viral and reportedly pushed the stock’s value up by USD17 billion within an hour.This demonstrated the power of social media – at a time when social channels barely registered on wealth managers’ radar.

The availability and breadth of information wealth management clients can access on their own are changing the way the industry functions. The relationship between advisor and client must also change to keep up with the times.

Bucking the trend

In China, Tencent not only embraces social media, but thrives because of it. Having avoided the e-commerce boom (and subsequent bust), Tencent moved straight into mobile commerce. Taking a natural next step from its mobile chat product, it has built a full suite of financial products. As a mobile-commerce entity, Tencent operates under an integrated ‘Digital Ecosystem,’ which enables continuous business interactions with social media users. WeChat serves as an integrated platform for e-commerce (PaiPai), payments (Tenpay), and basic banking services (WeChat Wallet). And by tapping into data analytics, Tencent can assess user behaviours through social interactions among 500 million WeChat users. In this case, trust was not an issue, given the vast brand recognition the organisation already enjoys.

In the UK, Darwinex (formerly TradeSlide) is a social trading broker and asset manager that utilises a trading platform that rates its investors’ strategies according to factors including risk, scalability, performance and experience. Other investors can evaluate peer trading strategies and invest similarly. This forex copy trading system is regulated by the FCA.

Clients’ ‘paradox of choice’

Traditional wealth management firms have provided a high level of client service via strategists, analysts and managers, who delivered customised investment and financial products. Technology has expanded exponentially the choices for consumers, with do it ourselves becoming their new mantra. Wealth managers must consider expanding their offerings and new avenues of outreach to address new client demand and the abundance of information available through multiple channels. These data choices can be overwhelming.

This so-called ‘paradox of choice’ is affecting the way clients approach wealth management. More is better may not be the most effective avenue to pursue wealth. Smart consumers are looking for informed information from trusted sources. Verified experts from outside the wealth management industry are gaining traction. Like Amazon and eBay, which add top reviewer and top seller designations to its notable users, investment-focused sites like The Motley Fool (TMF) legitimise frequent contributors with official TMF monikers. The tech savvy wealth managers have an opportunity to build relationships with the upcoming wealth management client.

The empowerment to conduct research and build knowledge via social media will continue to grow, along with the consumer desire to collaborate online. Wealth clients already have been using social media space for years and have the potential to leave wealth managers behind. The industry must work to understand what consumers already know and how to provide additional benefits that consumers cannot get themselves via social media or other digital channels. This is the real value-add the industry can provide.


1Brenda Bouw, ‘Social Media Growing in Importance for Investors Survey’. Thu 23 , Jan 2014 Yahoo Finance

Wealth Management

Wealth Management

KPMG's Wealth Management practice offers a range of services to superannuation funds, life offices, employers and fund trustees.

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