Four Ways to Transform Wealth Management for a New Generation

As digital propensity continues to rise, with a growth in the number of assets and complexity, the issue of app fatigue has grown too. A result is that clients are increasingly viewing experiences—rather than product offerings—as differentiating factors in wealth management firms.  

Younger generations are more likely to test new digital financial products, especially those of innovative fintech firms, which are trying to disrupt a single vertical rather than a broad set of services. New players are setting the bar in terms of customer experience and expectations across all industries. In order to onboard and retain new generations, WM firms need to provide an experience as entertaining and immersive as watching Netflix or playing with the Oculus. On top of this, they will also need to leverage the social dynamics that clients have become acquainted with on online platforms to allow them to connect with others and share ideas.  

However, while the proliferation of fintech firms represent a threat in terms of new competitors, they also represent an opportunity. The dispersion of asset classes, wallets, apps, products and platforms can be overwhelming and require cognitive load to keep track of everything. WM firms can tap into this opportunity of unlocking experiences that provide clients a one-stop investment environment, aggregating their assets under one unified, holistic or even gamified view. Also key is explaining the data behind those assets through exclusive experiences and new formats that speak the language of younger generations.  

A report by the Kings Court Trust suggests that we are on the cusp of an unprecedented cross-generational wealth transfer. By 2027, in the UK alone, it is expected that wealth transfers will nearly double from the current level of £69 billion to £115 billion every year. 

However, despite the significant wealth transfer set to take place in the coming decades, recent trends show how younger generations are either more optimistic they can manage their wealth by themselves or simply don’t trust financial advisors as much as their parents do.  

Instead of trying to get younger investors to follow in their parents’ footsteps, WM firms need to acknowledge new generations’ diversities, anticipate their appetite for different asset classes and provide the relevant educational tools beyond what they can find on Google or other apps. 

Learning about wealth and investments doesn’t have to be synonymous with reading dense, technical PDF reports from Chief Investment Officers. Younger customers are looking for learning opportunities that go beyond financial returns and that can address financial wellbeing on a more personal level. Innovative educational tools can help start the conversation on wealth with the broader family, and family-focused features can create a stronger bond with their younger clientele that can make it easier to include their needs in the overall family wealth plan.

We live in a world where financial advisors are no longer the sole source of investment knowledge. This knowledge is now more accessible to clients through social platforms and websites. Consequently, clients are more prone to independently forming their opinions about potential investments before seeking the advice of a wealth manager.  

Today’s established clients spend time on many different financial blogs and platforms, such as Twitter and Seeking Alpha, and are more likely to come to the advisor already with an opinion in mind about specific investments.  

At the same time, younger generations are becoming more comfortable with sharing the story of how they’re building their wealth. Rather than spend time with their WM advisor, they’re more likely to be active on social media. In fact, while friends and family have the most influence on young people’s financial decisions, according to a report by Morning Consult, roughly one-third of responders cite Instagram, Reddit and Twitter as primary sources of information.

As clients access news online and collect more data points, it has become increasingly challenging for them to check the veracity of their sources. This challenge is also found on parts of social media, where the depth of information is usually limited to a few characters.  

Wealth managers need to find a middle ground where the essential guidance they bring to the table meets the research that clients have done on their own time, enabling a richer and more personalized conversation. Seeing where the client is coming from is a necessary requirement for WM firms. It is no longer sufficient to rely on the view of what the client has done in the WM firm’s own ecosystem, but instead needs to extend to what happens outside of it.

A younger cohort of high-net-worth individuals (HNWIs) is emerging, whether through their enterprise, a wealth transfer or a combination therein. Meanwhile, according to a 2022 report by Capgemini, 62% of wealth managers say they cannot confidently understand and cater to millennials.  

As millennials grow in economic power, wealth management firms will be courting a tech-immersed generation that has grown up in a world that is digitally native, fast and reactive. This generation thrives on technology and can quickly master any new tools that come their way. Therefore, it’s only fitting that wealth managers actively keep up with recent tech innovations in their sector, particularly in the growing fintech space. 

The line between the real and virtual worlds will get blurrier across all sectors, but are having a real impact on the notion of wealth. The rise of NFTs (non-fungible tokens) demonstrates the interest younger generations have in redefining what it means to have, acquire and manage assets. In addition, metaverse experiences can immerse customers in new worlds that simulate scenarios that are not replicable in real life. Considering these new domains can show your younger clients that you’re willing to try new methods and engage them further.