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Empowering investors through digital platforms

In this commentary, Marco De Freitas, Vanguard’s Retail Head of Client Experience and Digital, discusses the rapid adoption of digital platforms that benefit investors and organizations, but also the obstacles unique to the financial services industry that impede even greater adoption.

One of the saving graces for people’s work and personal lives during the pandemic was the ability to use digital platforms. That’s not exactly breaking news to anyone who has been in Zoom or Teams meetings with colleagues or distant relatives over the past 2½ years or to those who order banh mi and pho through GrubHub. But it’s not just COVID-driven necessity driving the convenience and wider adoption of apps, websites, and videoconferencing tools.

Even before the pandemic, but particularly during those crucial early months of the lockdown, organizations—Vanguard among them—were improving their online customer experience by embedding new technologies and by investing in and accelerating enhancements in response to greater digital traffic. These advances often came with the goal of increasing self-service as well as enabling better consumer decision-making.

These efforts worked to boost customers’ digital interactions, though the most dramatic jump came during the early months of the pandemic. In the U.S., 65% of customer interactions were digital in July 2020, up from 41% in December 2019, according to research by McKinsey & Company. This kind of digital adoption rate would previously have taken more like three years.

But adoption rates are still going strong, and they extend to financial activities as well. In a recent Vanguard survey of U.S. investors, nearly 70% of respondents reported being comfortable conducting financial business online, and more than half (52%) were comfortable doing most of their investing online. Furthermore, almost 60% of respondents preferred conducting financial activities online over other methods such as making in-person transactions and phoning customer service.

More control, more convenience, more cost savings

Survey participants cited a plethora of benefits in managing their finances digitally, among them:

  • Saves me time (81%)
  • Can conduct my financial business at any time (75%)
  • Faster access to my funds (67%)
  • Allows me to be more in control (47%)
  • Allows me to be more responsive (38%)

Whether simply checking the performance of specific stocks or interacting with their 401(k) investments, individuals empowered by technology can take action on their money when and how they want, without relying on human support.

In essence, our survey respondents were citing the benefits of what I call the three Cs of digital finance—control, convenience, and confidence—and particularly the first two.

Broader digital adoption has positive implications not just for investors and plan participants but also for asset managers, advisors, plan sponsors, and administrators. The initial capital outlay for digital enhancements can be extensive, but it brings benefits over the long run for all parties.

Asset managers, plan sponsors, and administrators can gain efficiencies and scalability. One can even argue that there’s a fourth C for these institutions: cost savings. In Vanguard’s case, because of our mutual structure, we can pass those savings back to our clients and investor-owners.* And by reducing the number of manual transactions that can introduce errors, technology can lower the risk of fiduciary liabilities.

Financial advisors can also concentrate on relationship management and the most complex client needs that provide the most return on investment, rather than on the more routine transactions and decisions easily addressed by apps and algorithms.

Ultimately, what benefits the individual investor also benefits the financial institutions serving them.

There are, however, obstacles to further digital adoption that are unique to financial services, and some of those involve human psychology more than digital capabilities. In other words, while control and convenience are readily apparent, the third C—confidence—has been lagging.

Confidence hasn’t kept pace with the other Cs

Although more investors are comfortable taking their investing experience fully online, Vanguard’s survey found that some respondents are still uncertain about engaging digitally with their financial services firms.

Almost half the respondents (48%) cited security concerns as the reason they would not conduct financial activities online, regardless of overall comfort with their financial firms’ digital platforms. Confusion about the platforms was a distant second reason (22%).

More than 16% of respondents were not comfortable conducting their financial business online. Close to 19%, or one in five investors, were not comfortable doing most of their investing online; in other words, they might have no problems checking their bank balances online but might not make a trade in their brokerage account that way.

Safeguarding data remains a critical area of focus for Vanguard and other financial services institutions that have been adopting more sophisticated security measures.

How far we’ve come in addressing concerns

As an example of such measures, we completely redesigned our mobile app for individual investors. Besides being easier to use, it has a highly secure login that uses biometrics and other multifactor authentication capabilities.

Many of my industry peers have adopted more secure methods of account access such as facial and fingerprint recognition. We’re also improving website features for even better control and convenience. Likewise, other financial services firms have been accelerating enhancements to their online experiences and mobile apps. Companies should encourage digital-reluctant investors to explore these advances. Not only will those investors benefit from the upsides enjoyed by their digital-leaning peers, but they’ll also see how websites and apps have moved the needle on security and navigation.

What the future holds for the three Cs

Investors will continue to see an evolution toward digital empowerment. Many improvements reflect efforts to empower investors by giving them greater control, saving them time, and addressing their major concerns as reflected in the Vanguard survey. From behind-the-scenes technological improvements to tools that investors can interact with to optimize their portfolios and maximize long-term outcomes, the prevailing result will be an even more robust and reliable user experience.

Over time, as digital enablement evolves even further, investors can expect prompts for better investment behaviors, better investment outcomes, and greater confidence in their financial futures. In a win-win situation, financial institutions will also benefit from greater digital adoption by their clients and participants.

A similar article by Marco De Freitas was first published on

* Vanguard is investor-owned, meaning the fund shareholders own the funds, which in turn own Vanguard.


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