Digital wealth management firms have introduced disruptive industry changes that are here to stay, and traditional players need to act quickly to determine how to stay competitive, says EY.

While some have discounted the robo-advisor movement as no match to human investment advice, an EY report suggests otherwise. Digital entrants’ efforts to streamline the online client experience, provide greater transparency, and lower prices for lower-end markets have gained traction.

Read: Should you worry about rob0-advisors?

“We have yet to see how the digital models will hold up in a market downturn and whether they will reach profitability quickly enough, but the improved client experience and high level of transparency can’t be underestimated,” says Gregory Smith, wealth management advisory leader at EY. “They’re also tapping into markets that are largely ignored by traditional wealth managers.”

Traditional firms have largely focused on high-net worth clients, but these emerging digital firms are targeting a wider range of clients, across all demographics.

Read: Advice technology’s winners and losers

While the tech-savvy millennial generation is the natural target for automated investment advice, baby boomers are another promising market. As they retire and switch from investing money to withdrawing money, they too will be eager to use their mobile devices and tablets to check their portfolio balance, withdrawals and fees at the touch of a button.

In addition, the greatest wealth transfer in history is currently underway as boomers pass along wealth to their heirs. This is creating more pressure on the traditional model, because the next generation of clients demands transparency, accessibility and seamless customer experience across all digital devices.

Read: Why you may need a robo-advisor

As of 2011, there are over nine million baby boomers in Canada, making them the largest generational client base, notes the report. They are closely followed by their children – the computer-savvy millennials.

“Traditional firms willing to venture into automated and hybrid models will face challenges, but those willing to invest in digital will be able to engage clients across generations in a cost efficient way,” adds Smith. “It’s important to embrace the growing pains and invest the time and effort required to go virtual, as the reward will be worthwhile.”

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