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Contributors:
Tannor Pilatzke, Manager, Business Transformation & Strategy, EY Canada
Amisha Khatri, Senior Consultant, Business Transformation & Strategy, EY Canada
Brandon Lapid, Senior Consultant, Business Consulting, EY Canada
Chris Stromotich, Consultant, Business Transformation & Strategy, EY Canada
Lindsey Tropea, Senior Manager, Business Transformation & Strategy, EY Canada
Swati Cavale, Senior Manager, Business Transformation & Strategy, EY Canada
Canadian investors are facing ongoing complexities in the global market that make investment decisions more challenging.
In brief
- Canadian investors face growing complexity across wealth management priorities.
- Volatility is giving Canadian investors a new reason to consider alternative service providers, products and offerings.
- Wealth managers have a unique opportunity to strengthen client relationships by positioning themselves as proactive allies capable of navigating complexity, empowering clients and delivering new kinds of value.
While Canadian investors have largely moved past the initial shock and disruption of the last few years, they still face ongoing complexities in the global market that make investment decisions more challenging. This reality is causing clients to feel less financially prepared — and more receptive to advice and guidance — than in the past. They’re more actively seeking out advice, too.
Evolving investment needs. Changing market strategies. Big questions about managing and transferring wealth. Canadian investors say they’re facing more complexity across wealth management priorities than they did two years ago. They’re also more likely than their North American counterparts to switch providers in the next three years. This complicated landscape is giving way to new opportunities for wealth managers who are ready and able to position themselves as trusted advisors in the face of ongoing volatility.
How is wealth management transforming in Canada and around the world?
Wealth management clients’ expectations are changing. The 2023 EY Global Wealth Research Report surveyed wealth management clients across 27 geographies, including approximately 500 from Canada. Five key trends emerged from the research:
- Like global respondents, Canadians say managing their investment and wealth needs is getting increasingly complex. That finding is amplified among younger demographics — specifically, Millennials — and those who already feel financially unprepared to meet their goals. Retirement planning stands out, with 18% more Canadians than their global peers saying this process has increased in complexity since 2021.
- Canadians generally feel less financially prepared than other North American and global respondents. This sentiment increases among those already experiencing greater levels of complexity managing their investments and wealth. In fact, 25% more Canadian respondents who report higher levels of complexity are also financially unprepared compared to their global peers. Canada’s mass affluent and high-net-worth clients — those with up to $5 million in investible assets — express lower levels of financial preparedness compared to very-high-net-worth Canadians — those with $5 million to $29.9 million in assets. Bottom line? Canadian investors are less prepared compared to their global counterparts of similar wealth levels. This could be influencing perceptions of their retirement needs as well.
- As with global clients, Canadians are turning to more defensive strategies to meet their financial goals. Clients increasingly see a need to protect wealth and investment returns while facilitating adequate income. That decreased expectation of what will be left to transition to the next generation is causing Canadian investors to move next-gen wealth transfers further down the priority list.
- Canadian clients are increasingly open to switching wealth management service providers. Although aligned with their global peers, Canadians are nearly two times as likely to make a change compared to other North American investors. In fact, Canadians are less likely to move for technology/digital capabilities relative to their global peers, especially among Gen X investors. Meanwhile, Canadians are twice as likely to switch if their advisor doesn’t share their values. What motivates them to stay? Clients with discretionary advice/portfolio management relationships are nearly 40% more likely to stay put than their global counterparts. That’s likely tied to the fact that, by nature, discretionary relationships create greater degrees of trust with advisors.
- Most Canadians still prefer in-person interactions for a range of services. Although clients do show a willingness to engage in more virtual collaborations, more than half of Canadians would rather carry out account openings in person or through digital collaboration like video chat. They also prefer in-person discussions for agenda items including investment management — i.e., managing portfolios or receiving advice on products, market trends and investment purpose — ongoing account management — i.e., general account updates and changes or exclusive offering discussions — and client insights.
Each of these trends represents a new way for wealth managers to differentiate themselves with increasingly discerning clients. Put simply: helping clients achieve their goals amid growing complexity can hold the key to lasting success.
How can you embrace changing expectations to deliver for Canadian clients now? Focus on three core areas to transform insight into deeper relationships:
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Chapter 1
Navigating complexity
Clients are hungry for stability and guidance. They are also looking for wealth managers to “do more for less.” Positioning yourself as a partner capable of navigating complexity efficiently can differentiate you in a sea of competition.
What are clients saying? Ever-increasing complexity and recent market volatility have stalled the consolidation trends of earlier years. A large proportion of Canadian clients now expect to work with multiple providers by 2025. They are willing to shop around for the best products and advice to work through this volatility, which has overtaken prior trends focused on consolidated simplicity. Investors now seek additional advice to support better performance and diversification — and they’re willing to add providers or consider investment firms and FinTechs to get it.
By the numbers:
- Canadians are 50% more likely to respond to market volatility by increasing or decreasing allocations to offensive and defensive positions in their portfolio than other North American clients, but on par with global client responsiveness.
- Greatest change: the most impacted service offerings were FinTechs and digital assets. Over 40% of survey respondents expected to maintain or increase their use of digital service providers — specifically FinTechs and digital asset offerings – in the next three years.
- Some 45% of Canadians are looking to add, switch or move providers. This is a 24% increase compared to our 2021 survey results. This willingness to take action varies within Canada. For example, compared to the 45% national average, only 29.9% of respondents from the Western provinces — British Columbia, Alberta, Saskatchewan and Manitoba — cited this intention to add, switch or move. By comparison, 57.7% of respondents from East Coast provinces cited this intention.
- All told, 45% of Canadian clients plan to add a new provider, move money to another provider or switch altogether in the next three years. Some 17% cite market volatility as their prime motivation for making a move. They’re seeking further support and guidance as it relates to product complexity and market volatility.
How can wealth managers help? The goal must be to drive value through best-in-class client experiences. There are many ways to do that, including virtual engagement tools that provide necessary agility and flexibility, as one player in a client’s wider financial ecosystem.
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Chapter 2
Supporting clients
Clients are seeking a hybrid wealth management model. To meet that need, wealth managers must aim to foster a broad client experience that blends virtual and in-person touchpoints, innovative collaboration tools and self-service capabilities. This combination can help strike the right balance in an environment where clients are willing to try out new providers, products, advice and learning.
What are clients saying? Personalized experiences help Canadian clients feel supported at every stage of the wealth management journey. They’re looking for enhanced, multi-channel models that allow for easy self-service, flexible advisor interactions, greater interactivity and enhanced expert support.
By the numbers:
- Canadian investors feel they need more advice across services — investment, banking, financial planning and specialized services — when compared to their North American and global counterparts.
- Although Canadians lag the global average for digital engagement preferences, over 40% of Canadians preferred virtual collaboration such as video chat or email through the financial planning, investment management and account management components of the lifecycle.
- Canadian investors buck North American trends, with 19% and 20% preferring digital marketing and digital matching engines, respectively — both at least 10% higher than North American averages.
- While global clients expect to review and maintain their financial plans much more frequently than Canadians, 80% of investors expect to meet at least once a year to monitor, review or update their existing plans. Canadians also expect 50% more in-person interaction than their global peers.
- Digital preferences vary across Canadian regions, with Québec showing the strongest preference for using digital self-serve tools when creating/maintaining a financial plan, getting advice on the ways external variables could impact their financial plan, monitoring and reviewing progress against goals and creating a holistic plan using data from other providers that they work with. Québec had a lower proportion of financial assets managed under an advisory style — wherein the advisor provides counsel and the client makes the ultimate decisions — and a higher proportion managed under an execution-only style — through which the advisor simply executes the client’s directions — when compared to Ontario, as well as East Coast and Western provinces.
How can wealth managers help? Putting client expectations front and centre when designing the comprehensive wealth management experience is critical. With expectations varying widely across regions and demographic groups, client experiences must be innately adaptable. Building in that flexibility helps investors feel like they’re in the driver’s seat — with enough support to generate stronger bottom-line results.
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Chapter 3
Providing value
Clients are looking for a new kind of value. Now’s the time to build on existing client trust to be more transparent — especially regarding hidden costs — deploy better investor education and strengthen client involvement to show a distinctive link between products, performance and outcomes.
What are clients saying? Although Canadian investors are relatively satisfied with product access, wealth managers have an opportunity to improve perceived levels of product and service value. That’s particularly true around newer asset classes.
By the numbers:
- In 2023, investment performance, competitive fees, brand reputation and range of products became the top drivers for Canadian investors choosing a wealth manager. That’s shifted somewhat since 2021, when strong track record of performance, wide range of investment products and competitive fee structure mattered most to Canadians. What’s more, the range of product and brand have flipped over the same period. That is, the range of product was a larger driving factor for their global peers, in line with client-focused reform trends to simplify products and product shelf.
- Canadians value brand reputation and personal contact referrals more highly than their global peers. Even so, they still weigh investment performance and fees as the most important factors when selecting a wealth and asset manager. Digital offerings mattered to global survey respondents just slightly more than to investors here in Canada.
- Investment performance was the top driver in wealth management selection nationally. It was equally important in Ontario, where nearly 50% of respondents pegged investment performance as a top-three reason for choosing a given wealth management provider. In the Western provinces, investment performance was the most influential selection driver for 55.5% of respondents. That finding was lower in Québec, where 32.1% named investment performance in their top three reasons, and the East Coast provinces, at 38.5%.
- Canadians have a 45% satisfaction rate with environmental, social and governance (ESG) product performance — which is one-third higher than their global peers.
How can wealth managers help? Examining overall strategies and operating models enables you to make sure that current ways of working support the aspects of wealth management Canadians value the most. Assess your model to identify and close gaps. Then communicate openly and consistently about the ways your offerings address key value drivers today. The goal is really to deliver value beyond low fees alone — and ensuring that clients see and appreciate that value.
Summary
Growing complexity and an increasing willingness to switch products or providers are transforming the Canadian investment landscape. Wealth managers who embrace this shift and proactively help clients navigate complexity, while empowering them and delivering value, can transform this volatility into opportunity. Doing so can also help firms grow their book of business and emerge as industry leaders. The key lies in taking action now. Don’t wait.