Looking at the current client potential of millennials, it’s understandable that many wealth managers have not yet adapted to this group and their needs. Millennials currently have significantly less wealth than their parents and are a losing proposition for most financial advisors, Nick Platjouw writes in an essay for finews.first.
This article is published on finews.first, a forum for authors specialized in economic and financial topics.
But over the next few decades, large fortunes will be passed down from baby boomers to their descendants in Generations X and Y. According to Cerulli Associates, over the next 25 years, $68 trillion is expected to accumulate in 45 million U.S. households. Not all of these households are attractive clients for wealth managers, but even if they only look at inherited assets of $5 million to $30 million, the dimensions of the Great Wealth Transfer remain huge. In fact, according to research firm Wealth-X, by 2030, $3.2 trillion will be inherited in Europe, as well as $8.8 trillion in the U.S. and $1.9 trillion in Asia.
The wealth transfer to millennials poses major challenges for asset managers. Studies show that around 80 percent of millennials want to find a new wealth advisor when they inherit. Additionally, new firms are entering the market every day. How can wealth managers position themselves to retain those inheriting – now and in the future – as clients and even attract new ones? First, consider three disruptive trends that necessitate a rebalancing between digital and in-person interactions in wealth management.
«This type of investor has new ways of thinking and therefore new customer needs»
The first trend is the emergence of the re-wired investor (Deloitte). This type of investor has new ways of thinking and therefore new customer needs. However, re-wired investors are not just younger people – their new ways of thinking have also reached older investors who now share their new customer demands in terms of asset management. Re-wired investors want to be able to do things digitally by themselves, expect a personalized experience across all channels, and want wealth management that adapts to their active lifestyle.
The second trend follows from the first: digital tools will play an increasingly large role when it comes to interactions between leading wealth managers and their clients. The influence of the re-wired investors is already evident here, shifting the ratio of digital to personal. Wealth managers now face the challenge of developing or implementing IT solutions that enable these high-value digital interactions.
«Wealth managers are relieved of repetitive, unproductive administrative tasks»
But once these solutions are in place, re-wired investors get the digital experience they want, while wealth managers are also relieved of repetitive, unproductive administrative tasks. And with data analytics and personalized recommendations for clients – even those at the lower end of the wealth scale – can be created and played out automatically. This enables regular engagement of all customers.
Third, the upheaval caused by the Great Wealth Transfer and the re-wired investors is being met by asset managers, some of whom are change-averse. These managers have neither extensive experience with the new type of investor nor a strategy for combining digital and personal in such a way that they strike a chord with them.
Wealth managers who are adapting to the re-wired investors are reshaping the client relationship – moving away from traditional interactions to embrace engagement banking with strong digital channels. This is because customers want a responsive, secure portal for their wealth management that is accessible across all devices and has state-of-the-art digital features. They’re no longer comparing brands, but rather experiences.
«Wealth managers need to ensure their offerings provide a great digital experience»
A purely digital approach to wealth management is not advisable because it leads to robotic, anonymous solutions. The human element must always remain a part of banking. This works with the right dovetailing of digital offerings and the human interactions that an engagement banking platform enables. For example, clients could automatically receive proactive data-based investment suggestions through digital channels, such as their wealth management app. They can then view the proposal in the app, and, if it interests them, they can connect with their advisor via an encrypted video call with a single click.
This example shows that wealth managers need to ensure their offerings provide a great digital experience. Additionally, they must enable straightforward interactions with advisors, convey the individuality of their brand, and evolve quickly, cost-effectively, and efficiently.
Unfortunately, it's not enough to just launch a new app or website. These tools, after all, only pass on the options offered by the underlying systems, and those options are usually far too limited. The back-end systems are often outdated and the front-end is dominated by a monolithic infrastructure. This legacy IT must continue to be operated, but it can hardly be modernized, making innovation impossible.
«This raises the question of how can wealth managers best introduce such a digital solution?»
Wealth managers, therefore, need a solution that bridges the gap between legacy IT and new requirements. This raises the question of how can wealth managers best introduce such a digital solution?
On one hand, it’s possible for them to develop the software completely on their own. But does that make sense, given considerations of time, cost, and skill? How much will the ongoing costs be for hosting, further development, support for employees, troubleshooting, security fixes, audits, and more? These expenses need to be weighed carefully, as they can easily spiral out of control. As an alternative to complete in-house development, it’s therefore worth taking a look at existing engagement banking platforms that can be customized to fit individual strategies.
An engagement banking platform is built on top of existing systems, such as the core banking system and CRM, as part of the integration process. The platform then provides a robust, flexible hub for wealth managers to realize the innovations they need. A solid engagement banking platform naturally comes with pre-configured customer journeys and offers turnkey apps, as well as web interfaces for customers that can be customized and live within a few months. For example, a turnkey wealth management app provides a portfolio overview, a performance journey and an instrument view, to name just a few.
In summary, an engagement banking platform can help wealth managers quickly create a state-of-the-art digital presence to meet the needs of re-wired investors. It also enables data-driven personal recommendations to be created and delivered automatically. It even relieves wealth managers of unproductive tasks, freeing them to spend more time on the conversations with their clients that really matter.
Nick Platjouw is a Senior Account Executive for Switzerland and BeNeLux at Backbase.
Previous contributions: Rudi Bogni, Peter Kurer, Rolf Banz, Dieter Ruloff, Werner Vogt, Walter Wittmann, Alfred Mettler, Robert Holzach, Craig Murray, David Zollinger, Arthur Bolliger, Beat Kappeler, Chris Rowe, Stefan Gerlach, Marc Lussy, Nuno Fernandes, Richard Egger, Maurice Pedergnana, Marco Bargel, Steve Hanke, Urs Schoettli, Ursula Finsterwald, Stefan Kreuzkamp, Oliver Bussmann, Michael Benz, Albert Steck, Martin Dahinden, Thomas Fedier, Alfred Mettler, Brigitte Strebel, Mirjam Staub-Bisang, Nicolas Roth, Thorsten Polleit, Kim Iskyan, Stephen Dover, Denise Kenyon-Rouvinez, Christian Dreyer, Kinan Khadam-Al-Jame, Robert Hemmi, Anton Affentranger, Yves Mirabaud, Katharina Bart, Frédéric Papp, Hans-Martin Kraus, Gerard Guerdat, Mario Bassi, Stephen Thariyan, Dan Steinbock, Rino Borini, Bert Flossbach, Michael Hasenstab, Guido Schilling, Werner E. Rutsch, Dorte Bech Vizard, Adriano B. Lucatelli, Katharina Bart, Maya Bhandari, Jean Tirole, Hans Jakob Roth, Marco Martinelli, Thomas Sutter, Tom King, Werner Peyer, Thomas Kupfer, Peter Kurer, Arturo Bris, Frederic Papp, James Syme, Dennis Larsen, Bernd Kramer, Armin Jans, Nicolas Roth, Hans Ulrich Jost, Patrick Hunger, Fabrizio Quirighetti, Claire Shaw, Peter Fanconi, Alex Wolf, Dan Steinbock, Patrick Scheurle, Sandro Occhilupo, Will Ballard, Nicholas Yeo, Claude-Alain Margelisch, Jean-François Hirschel, Jens Pongratz, Samuel Gerber, Philipp Weckherlin, Anne Richards, Antoni Trenchev, Benoit Barbereau, Pascal R. Bersier, Shaul Lifshitz, Klaus Breiner, Ana Botín, Martin Gilbert, Jesper Koll, Ingo Rauser, Carlo Capaul, Claude Baumann, Markus Winkler, Konrad Hummler, Thomas Steinemann, Christina Boeck, Guillaume Compeyron, Miro Zivkovic, Alexander F. Wagner, Eric Heymann, Christoph Sax, Felix Brem, Jochen Moebert, Jacques-Aurélien Marcireau, Ursula Finsterwald, Claudia Kraaz, Michel Longhini, Stefan Blum, Zsolt Kohalmi, Karin M. Klossek, Nicolas Ramelet, Søren Bjønness, Gilles Prince, Salman Ahmed, Peter van der Welle, Ken Orchard, Christian Gast, Jeffrey Bohn, Juergen Braunstein, Jeff Voegeli, Fiona Frick, Stefan Schneider, Matthias Hunn, Andreas Vetsch, Fabiana Fedeli, Marionna Wegenstein, Kim Fournais, Carole Millet, Swetha Ramachandran, Brigitte Kaps, Thomas Stucki, Neil Shearing, Claude Baumann, Tom Naratil, Oliver Berger, Robert Sharps, Tobias Mueller, Florian Wicki, Jean Keller, Niels Lan Doky, Karin M. Klossek, Johnny El Hachem, Judith Basad, Katharina Bart, Thorsten Polleit, Bernardo Brunschwiler, Peter Schmid, Karam Hinduja, Zsolt Kohalmi, Raphaël Surber, Santosh Brivio, Mark Urquhart, Olivier Kessler, Bruno Capone, Peter Hody, Andrew Isbester, Florin Baeriswyl, and Michael Bornhaeusser, Agnieszka Walorska, Thomas Mueller, Ebrahim Attarzadeh, Marcel Hostettler, Hui Zhang, Michael Bornhaeusser, Reto Jauch, Angela Agostini, Guy de Blonay, Tatjana Greil Castro, Jean-Baptiste Berthon, Marc Saint John Webb, Dietrich Goenemeyer, Mobeen Tahir, Didier Saint-Georges, Serge Tabachnik, Rolando Grandi, Vega Ibanez, David Folkerts-Landau, Andreas Ita, Teodoro Cocca, Michael Welti, Mihkel Vitsur, Fabrizio Pagani, Roman Balzan, Todd Saligman, Christian Kaelin, Stuart Dunbar, Carina Schaurte, Birte Orth-Freese, Gun Woo, Lamara von Albertini, Philip Adler, Ramon Vogt, Gérard Piasko, Andrea Hoffmann, Niccolò Garzelli, Darren Williams, Benjamin Böhner, Mike Judith, Gregoire Bordier, Jared Cook, Henk Grootveld, Roman Gaus, Nicolas Faller, Anna Stünzi, Philipp Kaupke, Thomas Höhne-Sparborth, Fabrizio Pagani, Taimur Hyat, Ralph Ebert, Guy de Blonay, Jan Boudewijns, Beat Wittmann, Sean Hagerty, Alina Donets, Sébastien Galy, Lars Jaeger, Roman von Ah, Fernando Fernández, Georg von Wyss, Stéphane Monier, Stefan Bannwart, Andreas Britt, and Frédéric Leroux.
