Social listening for wealth management
I was impressed with a recent JD Power survey of wealth management app usage that found that only 35 percent of wealth management apps offer chat capabilities and only 41 percent support secure messaging – two key communication channels used by Gen -Xern and Millennials are used. During the height of the pandemic, the survey said that 31 percent of investors said they had not had a consultant contact recently.
As investment products keep getting cheaper and robo-advisory growing in popularity, personal advice tailored to clients’ circumstances is still digital’s Achilles heel.
In order to close this gap, digital users are now turning to new consulting channels.
Financial advisory is seeing explosive growth on Reddit, the world’s third largest social network, by active users (only behind Facebook and Instagram). The main personal finance community alone has over fourteen million members, thousands of whom are actively reading at any time of the day. In addition, there are at least fifteen regional personal finance communities. The UK community (with over one hundred and seventy thousand members) has even created a complementary wiki site.
In January I commented on how banks and asset managers would use unstructured data in all relevant content in 2020. This data often includes real-time information and early warning signs that financial firms can use to adjust their offerings, identify new investment opportunities, and uncover previously hidden risks.
Active digital communities are exactly this type of content. “The volume and quality of conversations in digital financial communities show a great demand for financial advice.” says Vered Zimmerman, CEO of FinText, a UK fintech that uses AI to analyze investor conversations. “This makes online communities the most organic focus groups imaginable. Members are constantly looking for advice and opportunities for discussion. They speak out loudly about their views. Your unmet needs are all visible right there. “
Reddit’s “investing” community is particularly geared towards the US stock market. FinText found that the number of new daily calls was highly correlated to the S&P 500 Volatility Index
S&P Volatility Index
A thematic breakdown of the conversations within that community, Zimmerman said, shows that discussions sparked by requests for financial advice make up a large part of the overall conversation. (Other popular topics include company-specific stock prices, financial news, and, increasingly, questions about platforms and digital tools.)
Social Listening: A Competitive Advantage for Asset Managers
In a recent survey of the state of asset management, EY found that better informed customers are less likely to switch providers. The same study also showed an increasing appetite for independent financial advisors, particularly in the Wealth and HNW segments. The study concludes that the path for traditional wealth managers is to build trust and demonstrate value through thought leadership and financial coaching. ”
For years I’ve been talking about the need to tailor news to Gen Xers and Millennials. Social listening helps money managers get the message right. For example, younger generations, hit by the global financial crisis and paying back student loans, face higher levels of debt than boomers their own age. It’s no surprise, then, that a recurring theme in investor talks is the generation gap.
“Throughout 2019, the generational gap struck a nerve in the investing community,” says Zimmerman. “In each of the quarters of last year, at least one of the top five most active topics addressed these concerns. When the Covid pandemic broke out, that fear turned into concerns about economic recovery and employment levels. ”
Social listening also helps wealth managers spot trends. FinText monitors a number of topics on behalf of clients. The results, says Zimmerman, are often surprising.
Bitcoin, for example, is very much alive and well. “Younger investors see this as an emerging asset class that is almost comparable to gold. We find that they regard the overall lack of interest from institutional actors as an opportunity to create value. Wealth managers who can differentiate by providing insights into the portfolio management that includes Bitcoin and who gain an edge in a currently underserved niche. “
Traditional asset managers should seek advice in a timely manner
That summer I wrote about a Broadbridge survey that found 77 percent of financial advisors surveyed in the US and Canada said they were losing business due to the lack of technology to interact with their customers. Those who have lost their business said they lost an average of a fifth of their book.
Digital offers have turned asset management upside down, but also made the market hungry for high-quality advice and compared services with customer requirements in real time. Social listening provides an insight into these requirements. It helps locate customer needs during transformative life events – when they are most likely to seek financial planning – and identify current, underserved niches.
Will wealth tech catch up? Who knows? Right now, social listening offers asset managers an opportunity to escape the cookie cutter model and gain a unique advantage.