Digital Transformation: The Demographic Problem

This is the second post in a series looking at what’s keeping financial services organizations from creating a more TurboTax-like experience for their customer transactions. In my previous post, I gave an overview of the seven different roadblocks that now stand in the way of truly digital processing at many firms. In this post, I take up Roadblock #1: The Demographic Problem.

One of the big obstacles to truly digital transaction processing is that many financial services organizations are beholden to their wealthier, and many times, older customers who they believe do not want a digital experience. As I’ve pointed out elsewhere, the question of demographics and digital experience is more complicated than simply saying, “Seniors prefer dealing with real people, and millennials like digital experiences.”  The truth is all customers want to interact with their financial organization when they want and how they want. But let’s focus specifically on the issue of age and net worth, since that's something that gets brought up repeatedly.

Do older, high-net-worth individuals prefer to interact with real people over digital channels? The answer, according to recent research, is that it depends on the transaction. But as a rule of thumb, this demographic has dramatically increased its adoption of the Internet and online banking. (See research done by Pew here).

Financial services firms will usually look at this kind of data and add that that seniors might be using online banking, but they’re just checking on their balance and they aren’t conducting business online. But according to data from the Federal Reserve, consumers between the ages of 55 and 64 average a net worth in excess of $800,000. While that isn’t necessarily the traditional Trust client, it is a strong brokerage and life insurance client. Also, if you scan the list of Forbes 400, you’ll find it includes a growing number of young people, ages 20 to 29—i.e. high net worth and digitally-savvy.

Large wealth management organizations are usually the slowest to digitize their processes, and also the most likely to insist that their clients want the proverbial “white-glove” treatment. But here are a few reasons that missing the boat on digital transformation is likely to mean the loss of customers in the future:

Tech-savvy beneficiaries. When the beneficiaries of a trust (likely younger individuals) receive an influx of wealth, they are unlikely to keep those funds with an institution that is unable to serve their needs in a digital environment. Nobody wants to inherit several million dollars, only to discover they are going to have to fax in a signature page to initiate a money-movement transaction.

Cost of transactions. The advisors who service these accounts and might be doing the faxing on behalf of their customer are slowing down the transfer of funds; they are also making the process more expensive for the bank. Manual, paper-intensive processes are slow and expensive.

Speed of transactions. Even clients who do not want to initiate transactions electronically want their decisions to be executed quickly. And they want more transparency into the process. The average wealth management organization fields thousands of calls from clients and their support staff (advisors, attorneys, accountants) regarding the processing of transaction. And call centers are big cost centers for financial services firms.

Customer mobility. Being elderly isn’t what it used to be. Customers of financial services are living longer, healthier lives. That means more travel, which in turn means that meeting in person with a financial advisor isn’t always conducive. Older, high-net-worth customers may not move to a 100-percent, digital-first environment anytime soon. But that white-glove treatment we hear so much about will start to erode if financial services providers don’t begin digitizing the processing of their clients’ information.

The name of the game is to provide the ability to serve the client’s needs when and where they want. That will mean paper at times, and Turbo Tax-like experiences at other times. But to provide those types of experience, firms are going to have to address their process problems—and that’s what I’ll be taking up in my next post.

Rich Medina
Lane Severson
I’m a Practice Leader, managing relationships with Doculabs’ West Coast clients to improve information management and security.