Wealth management is underestimating the flow of information and influence of social media while wealth clients are beginning to embrace social media.
Conservative wealth management Chief Executive Officers (CEOs) who haven’t embraced social media themselves often underestimate the flow of information and influence of social media. Like Al Gore’s ‘inconvenient truth’ about climate change, the wealth management industry must take notice of the profound changes that social media will have on their business. Simply put: Social media is now too big to ignore.
The pool of prospective global savers has become larger, older and richer. Developing markets currently represent less than 20 percent of global personal financial assets, but represent 40 percent of global gross domestic product (GDP). By 2050, developing countries will represent 60 percent of global gross domestic product GDP. In China and India, personal financial assets have grown at a rate of 25 percent per year for the past 20 years.
All of this suggests that the wealth management industry is likely to continue its upward trend.
Social media can:
Social media is becoming pervasive in virtually every industry. Wealth management is already on the cusp of being surpassed by this highly disruptive technology.
The advent of social media in wealth management is illustrative of the paradigm shift affecting the industry today, including changes in client expectations, the ability of the industry to embrace technology, and the new direction wealth managers must take to stay current with their clients and the marketplace as a whole.
Consumers, the industry at large and wealth managers in particular must all adapt to the promise and potential pitfalls of Fintech and social media. The rules of wealth management are being rewritten. Whereas Fintech helps bridge the virtual gap between theoretical and practical technology adaptations for the financial services industry, so too does social media help change the mindset from traditional to modern thinking in wealth management.
Everything is changing:
Social media use reflects the preferences and proclivities of the modern consumer. The ability to instantly receive research and information on-demand is empowering wealth management clients to take greater charge of their portfolios and make financial decisions on their own – for better or for worse. They assume greater risks, and suffer unilaterally if social media-sourced investment advice doesn’t pan out. Investors are skewing younger as the general population ages and Gen Y surpasses Baby Boomers and even Gen X in terms of consumption. There is also an explosion in the middle class in developing countries, and they are younger and more internet savvy, creating new marketplace opportunities for wealth managers.
The financial technology-fuelled evolution is rapidly creating opportunities and challenges, forcing the traditional industry to change – whether they like it or not. The disruption comes from new technologies and from clients who are already adopting these technologies. With the added weight of maintaining their collective and individual reputations online, there is a real vulnerability that by not following suit, the industry faces disintermediation or even outright obsolescence.
Industry leaders often ignore social media because of a misunderstanding that it’s purely a vanity marketing play and they perceive it as too youth focused. The dangers lie in wealth managers struggling to accept the far-reaching impact of social media, and then sitting idle while their clients find their own way through the less experienced social media voices. Very few will come out ahead in this scenario.
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