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Wealth: How To Prepare For A Digital-First Future

The transfer of wealth from the Silent Generation and Baby Boomers to their heirs over the next couple of decades will be the largest such shift in history, with more than $80 trillion expected to change hands. 

It’s reasonable to assume that the beneficiaries – mostly Millennials and Gen Zers – will seek out professional advice on how to preserve and grow what they’ve inherited, but more than a third of financial advisors plan to retire in the next decade and fewer new advisors getting into the business to replace them.  

Bridge out ahead, right? Well, maybe not. For many of the new generation of investors, digital tools for managing their wealth are readily available. Then there’s AI, which may supplement or even replace the financial advisor at low or no cost (Figure 1). Tech-based solutions for wealth management are likely to grow in quality and adoption in the coming years, so financial institutions must start planning now for a world in which digital-native investors might not fully embrace the traditional advisor model. 

Figure 1: Attitudes of Next-Gen High Net Worth toward Investing​

Preferences include dealing with advisors but skew toward do-it-myself.​
Note(s): Next Gen HNW defined as 40 years or younger with either $500K+ in assets, $300K+ income, or $250K+ in investments (n=210) | ​Source(s): Curinos Customer Knowledge | 2022 Mass Affluent Research ​

For FIs hoping to compete for AUM and everyday banking relationships with the next generation of wealth clients, here are some key moves they should consider making now:  

  • Personalize, even if not in person. Given the high-touch nature of wealth-advisory services, personalization has long been a key defining feature. To offer counsel on the most important aspects of money management, advisors need to learn about their client’s goals, fears, hopes and dreams, and as a result, they often become an extension of the family. In a world where in-person relationships have less priority, FIs will need to use data to understand customer behaviors and preferences, and to provide tailored experiences and services accordingly. 
  • Embrace modern marketing. TikTok is no longer just about dance videos. Millennials and Gen Z use social media to engage with brands, and they’re influenced by marketing via platforms like TikTok, YouTube, Instagram and Snapchat. A postcard in their physical mailbox offering $500 for $250,000 in AUM is unlikely to resonate as strongly as rich video content that feels authentic and aligns with their values.
  • Educate via thought leadership. As new wealth management trends emerge and others become outdated, offering current and relevant tips, tricks and insights will be critical for success. Firms will need to meet clients where they are, through social media and other digital tools. It won’t be enough to simply post articles on a website with an antiquated search function and hope clients and prospects somehow find them.
  • Make DIY research available. Fintechs have excelled at creating interactive content and research tools, which will be increasingly important to younger investors who prefer to do their own research online. Interactive tools, calculators and simulations to show scenario-based outcomes will help these tech-proficient clients make informed decisions for themselves.
  • Fully integrate all digital capabilities. Few firms currently have a true one-stop shop for the full financial relationship, but the next generation of wealth clients still expects to be provided the latest digital tools. These include apps where they can view their entire relationship across deposits, investments and lending, transact seamlessly and easily pull funds from any account to cover purchases. 
  • Amp up customer service. Without an advisor to contact directly, how will wealth clients get help when something goes wrong? To be sure, creating a high-functioning, cross-balance sheet operating model for clients with broad relationships will be a challenge. And to further raise the degree of difficulty, Millennials and Gen Z are hardly monolithic – they may want to communicate by text, by phone or even in person. Even if an omnichannel solution is not available, the experience across all channels needs to be consistent.
  • Price it right. Wealth clients have come to expect generous consideration for their relationship, including higher rates paid, low or no fees on deposit accounts, lower rates on mortgages and hefty credit card rewards. Without advisor fees fueling revenue, how can firms delight these clients and still preserve margin? Understanding the value these next-gen investors place on particular services and then aligning pricing strategies appropriately is key for creating a profitable operating model. 

The idea of a world without financial advisors seems farfetched, but it’s virtually certain that the next generation of investors will be more likely to use digital tools to research investment strategies, spread their financial relationships across institutions, and rely on social media and their peers for financial advice.  

Financial institutions no longer have the luxury of kicking the can down the road when it comes to filling the gaps in digital capabilities and innovation related to the advisor model. The massive generational transfer of wealth is already underway, and now’s the time to focus on creating a value prop and service and operating models that rise to meet the expectations of these tech-savvy investors whose wealth is also on the rise.

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