A new generation of investors is putting pressure on the traditional advisory business. But just how accurate is this portrayal of the industry’s future? Where do things stand for the intermediaries and what are the risks?
Between cost pressures, generational change and digitalisation, no stone is supposed to be left standing over the next 10 years. This state of affairs is due to the next generation of investors, i.e. millennials or digital natives. Such is the conventional wisdom at any rate.
Those who advocate this scenario are quick to support their case with statistics. For example, the millennials, i.e. those born between 1981 and 2000, will account for more than two-thirds of the working population in 2025.
And they note that the distribution of income and assets will fundamentally change. In point of fact, the coming decades will indeed be marked by the greatest transfer of wealth in history.
Continuing Need For Professional Advisory
Worldwide, anywhere from $30 trillion to $59 trillion, depending on the calculation, is already expected to be transferred from one generation to the next. The relative importance of millennials and digital natives in the mix will therefore increase sharply.
But does that mean that a generation of investors is less interested in personal advisory and far more in the virtual equivalent? Are we talking about people who do not place any trust in personal advisory from intermediaries, their advisors and partner banks? Is the future of the financial industry really so bleak?
We do not believe that is the case. Future income growth, and even more importantly the passing of the baton from one generation to the next, will free up capital and in the process promote the need for professional advisory and wealth planning. In the future there will still be a clear need for asset managers, trustees and attorneys – with a strong bank as a partner.
Cosmetic Adjustments Are Not Enough
Naturally the generational change poses new challenges for intermediaries – and these challenges will require more than just cosmetic adjustments to the advisory process. To understand digital natives and their expectations means taking a close look at the manner in which the next generation communicates, how they interact with their advisors and which communications channels they use.
Naturally digital technology plays a key role in this process, not just in terms of communications but also for the decision-making process. Digital natives do not consider technology as a mere cost-free alternative to the current system but as an integral part of the way in which they approach and interact with their environment.
In that regard, the media and experts are quick to talk about a revolution to be feared. The reality is much less radical. The key is to concentrate on the focal point of the advisory activity – the client.
The Essence Remains The Same
It goes without saying demographic changes are bringing about a more diverse client base. Yet for all the market upheaval, technological change, generational shift and reallocation of wealth, the essence of the advisory relationship has hardly changed.
Regardless of whether a baby boomer, generation Xer or digital native is thinking about asset management or financial planning, the fundamental mechanisms remain the same. They invest in what they know. Their number one priority is to provide security for their family. Known brands take precedence over unknown brands.
Younger Clients Expect More
In that regard, nothing has changed. On the contrary, we find again and again that millennials adopt these core values to an even greater extent than the previous generation. There are some differences, however. Younger clients expect more from their advisors than just professionalism, far-reaching investment knowledge and the highest ethical standards.
These «new» clients also seek individualised advice that specifically targets their financial and life goals. That forces advisors to have an empathetic understanding of their clients’ personal circumstances, financial goals and investment profile while providing them with customised, first-class solutions.
Choice Of Partner Bank Is The Key To Success
In working with intermediaries, VP Bank therefore uses a boutique approach specifically oriented toward the needs of financial intermediaries. Through its so-called key account management, for example, VP Bank uses a comprehensive advisory approach for trustees and asset managers, with the most important services offered on a tailor-made basis.
The products and services are enhanced by an active advisory team whose dedicated investment consultants proactively offer such services as short- and medium-term investment recommendations, portfolio consulting and switch recommendations.
VP Bank’s doors are open to financial intermediaries in the South East Asian region.
This approach involves carefully chosen services that a robo-advisor – as opposed to a human advisor – simply cannot offer in this manner. The open architecture principle thus guarantees independent advisory, and with no proprietary products to sell, the firm avoids all potential conflicts of interest from the start.
Clients receive best-in-class investment products and first-class solutions, thanks also to our collaboration with highly regarded partners worldwide.
Trust Beats Algorithms
Despite all announcements to the contrary, humans will not be replaced in the foreseeable future. Instead of competing against machines, intermediaries must consider their added value as a complement to the possibilities of the digital age. The goal is to skilfully combine digital platforms and personal advisory.
Trustees, asset managers and attorneys gain insights and an understanding of the highly individualised needs of their clients through personal relationships. They make decisions based on their assessment of complex circumstances, their intuition and their expertise on the practicality of solutions, which can go far beyond traditional approaches. A machine has yet to replicate this function, and no algorithm can replace trust in an advisor.
First-Class Advisory Makes The Difference
That does not mean that the digital transformation can be ignored. In the years ahead, strategies, processes and business models will all need to become digitally integrated. But forward-looking ideas for the clients of tomorrow must combine the old and the new intelligently. In order to stay relevant in the world of digital natives, financial intermediaries must be able to focus entirely on their clients.
They need to look ahead, react quickly and be digitally experienced – and always keep their client’s interests at heart. In that sense nothing has changed. Lastly, they must have access to the best products on the market – professional, independent and global.
A Core Competency of the Bank
These service providers therefore depend on reliable partner banks to an even greater extent. They need a partner that fully understands the business model and special needs of the intermediaries and can offer customised solutions.
At VP Bank, the intermediaries business is certainly part of its DNA. The bank’s founder, Guido Feger, was himself one of the most successful trustees in Liechtenstein, and the intermediaries business is a core competency of the bank – hardly any other institution pays such close attention to this client segment.
New Twist for Old Values
Today, for example, VP Bank already has more than five booking platforms worldwide. Our international presence also enables us to take country-specific conditions into account as regards advisory and processing while supporting intermediaries accordingly.
The bank is currently well positioned and continues to grow in accordance with the needs of intermediaries, just as it has always done. For more than 60 years, VP Bank has therefore been a first-rate banking partner for demanding intermediaries and ultimately for their clients. The old values remain, but with a new twist.
Facts & Figures of VP Bank Group
VP Bank Ltd was founded in 1956 and, with its 800 employees (735 in full-time equivalents) as at mid-2016, ranks amongst the largest banks in Liechtenstein. Today, VP Bank is present with offices in Vaduz, Luxembourg, Zurich, Tortola (British Virgin Islands), Singapore, Hong Kong and Moscow. VP Bank Group offers tailor-made asset management and investment advisory services to private clients and financial intermediaries.
Thanks to the Bank’s genuine open architecture, clients benefit from independent counselling: included in its investment recommendations are not just the Bank’s own asset management solutions but also the products and services of other leading financial institutions. VP Bank is listed on SIX Swiss Exchange and is rated “A–” by Standard & Poor’s. The Bank has a solid balance sheet and capital adequacy. Its anchor shareholders take a long-term view and stand squarely behind continuity, independence and sustainability.
Facts & Figures of VP Bank (Singapore) Ltd
VP Bank (Singapore) Ltd is a boutique private bank with a client-centric business philosophy. Established in 2008, VP Bank (Singapore) Ltd is the Asian subsidiary of the Liechtenstein-based VP Bank Group with about 40 employees.
VP Bank (Singapore) Ltd provides specialized wealth management solutions and family office services for high-net-worth clients and professional asset managers.
VP Bank (Singapore) Ltd is dedicated to the protection and growth of clients’ wealth. The bank offers a holistic suite of services and advisory, not just in wealth management, but also in inheritance planning, structuring of trusts and foundations, as well as art and philanthropy. Apart from private wealth management, VP Bank (Singapore) Ltd provides comprehensive services for asset managers and other financial intermediaries. The service offering comprises a trading platform, banking services including ebanking and mobile banking and operational support. Partnership arrangements with professionals include tailor-made investment advisory, discretionary management solutions and custodian services.
