The EY Global Wealth Research Report found that 40 per cent of wealth management clients were planning to switch providers in the next three years.
The trend is happening globally due to the emergence of new digital solutions and evolving definitions of what clients value but locally it is likely being driven further by the royal commission and regulatory scrutiny of the sector.
“There is the potential for a significant movement across the Australian wealth management landscape over the next few years, as clients look for providers who can better meet their evolving needs.
“The impact of the royal commission adds an additional layer of complexity to a sector that is already facing intensified competition among both incumbents and new market entrants,” said EY Oceania wealth and asset management leader Antoinette Elias.
Those most likely to switch were ultra-high net wealth investors with 39 per cent planning to switch over the next three years globally.
Millennials were also driving the switch drive with 36 per cent intending to switch providers over the next three years.
The EY report found that no sole provider was able to meet the varied needs of clients, with many of them having at least five types of providers.
As new entrants and technologies emerged wealth managers needed to evaluate their offerings and redefine how they provide financial advice said the report.
“Those who can understand and deliver on what matters most to their clients, such as anticipating major life events and proactively engaging around them, will be best positioned to succeed,” Ms Elias said.
Life events were a major driver globally of a provider switch with 61 per cent switch providers after leaving a job with the second most popular driver being having a child, inheriting a large sum or starting a business.
IFA’s and fintechs were set to be the big winners of the transition with independent advisers and independent firms to see a rise of 73 per cent and 93 per cent respectively over three years.
Fintechs looked set to see a 53 per cent increase, significantly higher than the global increase of 19 per cent despite the new entrants having lower levels of assets under management at present.
Generation X seemed to be the driver of fintechs, with 51 per cent anticipating using a fintech provider over three years and with 41 per cent of Millennials feeling the same.
Transparency is still a big player for Australian clients, with 71 per cent of clients saying they had full awareness of fees.
Ms Elias said wealth managers recognised their clients expected more than just a strong performance, but managers struggled to communicate their value offering.
“The answer is not simply in lowering fees, but rather a combination of increasing transparency and predictability in pricing models, and equipping advisors with ways to communicate value beyond investment returns,” she said.
