There are trillions of pounds set to be inherited by younger people over the next 10–20 years. This is called the Great Wealth Transfer, and unfortunately, most of those people will take their money away from their parents’ trusted adviser to a new wealth manager of their choice. How can private banks prepare for this and ensure that the next generation of wealthy clients will stay?
What Makes The Next Generation Of Wealthy Clients Different?
It is clear that the new generation of wealthy clients have different objectives and priorities from the generation that came before them. The next generation places a lot of value on the ability to demonstrate environmental, social, and governance (ESG) aspects of a portfolio in addition to financial returns.
Another interesting development is that the reasons for establishing offshore structures have evolved over time. What used to be primarily about tax mitigation is now more about succession planning, preserving wealth, and giving back through philanthropy.
The next generation is also expected to be more sophisticated and better educated—most likely having been educated in more than one jurisdiction.
Private banks need to evolve and align with the values, preferences, and tech-savvy expectations of younger high-net-worth individuals (HNWIs). This group, known for being digitally adept and socially aware, is looking for more than just traditional wealth management services.
How Does This Affect Advisors?
The ongoing transfer of wealth is creating fresh challenges for advisers. They now need to help families navigate succession planning, promote financial literacy among younger generations, and prepare to assist new clients who have different goals in mind.
Tips To Attract The Next-Gen Of Wealthy Clients
Succession is a process, but it is vital for private banks to start preparing for this shift so that they can retain existing clients and attract new wealthy clients. Here are a few ways to do that:
Soft Skills
Advisers will need to ask the difficult questions. It may not be as easy for private bankers who have had a long-standing relationship with the previous generation to build the same type of relationship with the new generation. They will need to develop their soft skills to build rapport with their clients, ask hard questions, and understand their clients’ thoughts and needs.
Keep Up With Digital Innovation
Everything is going digital nowadays, and the next generation of clients will most likely be far more tech-savvy than the previous generation. Private banks need to ensure they have user-friendly platforms, secure communication channels, AI-driven insights, seamless digital processes, and features such as real-time portfolio tracking systems.
Offer Personalised Service
It is clear that newer generations crave personalised and tailored services that suit their individual needs and goals. By leveraging data analytics, banks can provide bespoke advice that resonates, such as personalised ESG portfolios or smart tax strategies designed for entrepreneurs.
Cater to ESG Preferences
Newer generations tend to place a lot of value on sustainability. It is recommended that private banks offer sustainable investments, such as green bonds or funds supporting renewable energy.
Clear Reporting
Transparency is key when working with the next generation. They demand clear, accessible reports on their investments.
Financial Literacy Programmes
Financial education can be a great way to bridge the gap for new generations navigating complex financial landscapes. Offering workshops in areas such as tax planning or philanthropy can help build the relationship of a trusted adviser with the next generation.
Networking Opportunities
The next generation places a high value on experiences and connections. Hosting events such as tech summits or galas can help strengthen client relationships.
Security
Security is of utmost importance, whether for new or older generations. By guaranteeing transparent, impenetrable transaction records, blockchain technology can increase client confidence.
AI and Robo-Advisory Services
By providing inexpensive, round-the-clock access to financial advice, AI-powered robo-advisors can be used in conjunction with human advisers. Younger clients, who are used to immediate responses, will find this combination of technology and expertise appealing.
Should Private Banks Try To Attract Wealthy New Generation Clients?
Private banks should not miss out on the Great Wealth Transfer. Letting these clients move on to a new wealth adviser would be detrimental. There are ways in which private banks can entice these clients to stay and even attract new ones. Firstly, private banks need to recognise the differences between the two generations and understand that the new generation will have different goals and priorities.
Then, with strategies such as soft skill development, robust security, clear reporting, and personalised services, private banks can appeal to the newer generation and possibly become their trusted advisers.
The wealth transfer currently taking place is as much a cultural change as it is a financial one. Younger HNWIs will remain loyal to private banks that share their values and expectations—and they will also help determine the future direction of wealth management.