One in five Canadian investors plan to switch wealth management firms in the next three years, according to a new report from Ernst & Young (EY), the EY Global Wealth Research Report. The report looks at four key trends and asks a series of questions intended to help firms and advisors better understand current client priorities and preferences.

“Perceptions around value for wealth management products and services are rapidly changing,” writes EY Canada’ national wealth and asset management leader, David Hurd. “Although three quarters of Canadian investors say their advisor provides value for their money, roughly 40 per cent remain concerned about hidden costs when working with their wealth manager,” he adds, saying there is room to improve transparency in this respect.

When discussing their reasons for wanting to change firms, one-fifth of the 500 Canadian investors surveyed said investment performance and the pandemic itself were equally important considerations influencing their outlook. They also found that Canadians use an average of 4.1 investment products but expect to see themselves using an average of 5.5 products by 2024. “About half of investors prefer to use a single-source financial services provider,” the report’s authors write. “While we saw an appetite for that kind of consolidation globally, it was particularly prevalent among Canadians. Conservative investors and those with low to medium investment knowledge are most likely to opt for a single provider.” 

They add that “there is a significant opportunity for wealth firms to integrate a full range of financial services, including banking, insurance, wealth and investments into single client relationships, unlocking gains in wallet share.” 

Hybrid engagement approach 

In addition to exploring the trend of client interest in switching firms, they say the right mix of products and services will set firms and advisors apart in the future, and a hybrid engagement approach will be key in the future – more than half of those surveyed said they are interested in some kind of virtual engagement going forward.

“The stronger an investor’s knowledge is, the more likely they are to want digital and virtual tools, as well as some level of virtual engagement,” the report’s authors write. At the same time, however, they add that “the higher the investors’ net worth, the greater their interest in preserving personalized, authentic interactions with a real advisor. Providers that strike a hybrid balance between digital tools and meaningful advisor relationships can differentiate themselves in a post-pandemic market where investors will be seeking both.” 

ESG investments 

Finally, the report looks at investor opinions about environmental, social and governance (ESG) investments, saying the majority are not yet ready to choose an ESG-focused investment at the expense of their bottom-line results. “Investors here rank sustainable investments as the sixth most important factor when choosing a wealth manager,” behind strong performance, a wide range of products, competitive fees, advisor reputation and a strong digital offering, they add. 

“That doesn’t mean that purpose doesn’t matter. Rather, investors here aren’t yet emphasizing this element of their decision-making to the degree that global markets, regulators and institutional investors are.”