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We are in the midst of the greatest generational transfer of wealth in history. Over the next decades, trillions of dollars will be passed from the Baby Boomer generation to Gen-Xers (born between 1965-80) and Millennials (1981-96). The wealth management opportunity is immense. Alexandre Duret, product director, wealth management, Temenos, writes

This younger cohort represents an opportunity (a must) for banks to expand their wealth management client base. But this is a very different customer to the High New Worth Individuals (HNWI) that banks are familiar with. They tend to be more socially and environmentally conscious. They expect digital services that are highly personalised and deliver convenience, and see no reason why wealth management should be any different. They are interested in new asset classes, such as cryptocurrencies, exchange traded funds, and investing in early-stage businesses. 

What has worked for banks in the past won’t work in the future. This new cohort needs a different type of wealth management product and experience; always accessible, hyper-personal, informed and transparent. A blaze of new fintechs are already striving to give them what they want. The wealth management platform market, a proxy measure of fintech growth in this sector, is expected to be worth just over $9 billion by 2028, at a CAGR of 13.8%. 

This is not news. But as the stakes rise and urgency becomes a necessity, banks risk myopia. In the race to win the wallets of younger clients, they must also keep a focus on the clients they have. 

The new with the old

Generational wealth transfer will not be an overnight exercise. It will take place across years and decades, and so banks must equally protect what they have now. This fact was recognised by Camille Vial, the CEO of Mirabaud, a 200 year old Swiss bank is moving to the cloud to modernise its wealth management business: “We are positioning ourselves as a leading partner for our clients today, and the generations to come…adapting quickly to their needs and to market trends whilst never losing sight of our core vision and values.”

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So how can banks reconcile this need to digitize and modernize their wealth management offering, while maintaining the intimate, physical advisory experience that remains important to many of its existing clients?

Spinning up a new, modern wealth management business may be tempting. Banks need only look at how much of the banking market has gone the way of neo banks to see the logic of this strategy. But running two separate businesses—the new and the old—is not cost efficient. 

Then there’s the question of brand credibility. In a world that increasingly feels out of control, trust matters more than ever; and a bank with history has a ready-made competitive advantage. Not leveraging that feels counter-intuitive. 

And anyway, it is misleading to neatly place wealth clients into one of two categories. Demographic generalisations are useful for macro conversations, but they miss the mark when it comes to real-life. For example, we may not be surprised to learn that 71% of HNWIs who are under 40 list ESG as a core objective of their investment strategy; but that leaves almost a third who are more motivated by other things. Likewise, we should not ignore almost half of the over 40s who also prioritise ESG. 

This caution to look beyond the stereotypes can also be applied to other aspects of the wealth management experience: digital or in-person advisory; self-managed or a managed portfolio; a high or low risk appetite? Amongst thousands of different clients, wealth managers will have thousands of different needs and expectations to meet. Banks that clump a generation together in a one-size-fits-all approach will inevitably fall short.

Turn on the tech

If you accept this premise, then the answer lies in technology. It is only with the scale and agility of technology that a bank can be many different things to many different wealth clients—a self-service, automated, low-cost product to some; a highly intimate and consultative service for others who are willing to pay for it; or a hybrid advisory approach that enables clients to choose their balance of the two. 

Technology that is plugged into an ecosystem of fintechs and financial institutions allows banks to offer a more diverse portfolio of investment opportunities. This includes new digital assets (think Bitcoin, tokenized securities, NFTs); or agenda-based investment strategies, such as ESG or an interest in specific territories and markets. This in turn enables choice, which enables personalisation. 

Technology also enables how this personalisation is performed. At the traditional end, you have advisors using deep data analytics to build bespoke investment strategies from the ground up. At the automation end, you have AI that delivers best-fit products based on a client’s profile, stated preferences and past choices. 

The simplistic descriptions above obscures the variety of capabilities needed: data processing, analytics, CRM, customer experience, (explainable) AI, integration software and security, to touch on just a few. Assembling all this using products from multiple vendors can quickly become complex and costly. In the meantime, new innovations are being released that will put the bank even further behind the curve. 

Moreover, any conversation around business transformation should start with the desired outcomes. The ultimate prize for banks may be more wealth customers and more assets under management, but this cannot be built entirely on an exceptional technological customer experience. Staff productivity, a quick time to market, compliance risk mitigation, higher STP rates, and a flexible, scalable cost model are equally important.

The power of one

What banks should be looking for is a single, end-to-end wealth management platform; one that comes with all the components needed, from self-service customer channels to segmented portfolio management; back-office processing to market data analytics. 

A single platform gives banks the ability to switch on new capabilities, and dial these up or down in line with the changing profile of their customers. In other words, the same platform provides the traditional client with the high-touch advisory management they cherish, while also serving new clients with the automated, 24hr, digital experience and opportunities that meet their investment objectives. Everyone in-between gets the balance they want. Meanwhile, an open architecture and product marketplace encourages a fertile ecosystem of software partners who can plug their inventions straight into the platform. A cloud hosted platform ensures ongoing innovations, security and compliance measures are pushed through automatically, as well as providing the agility to scale at will and cost efficiently. 

Just as a client looks for trust in their wealth managers, so a bank must trust its technology partner. It should look to the track record of the vendor for delivering other large scale service transformations for banks. And it should measure scale not simply by the value of assets managed through the platform, but the expanse of countries where those assets are, as that evidences a mastery of understanding different regulatory jurisdictions. The bank should expect the platform’s provider to be at the centre of a buoyant ecosystem of solution providers and financial services innovators. Even better if the same wealth platform can also provide access to other core banking capabilities, thus reducing the need to integrate these from elsewhere. 

Conclusion

It is incorrect to solely characterise the opportunity of generational wealth transfer as the battle for new, younger clients. They are not alone in their demand for superior digital experience, greater price transparency, highly personalised services and financial performance. The banks that win will be those that see through the demographic demarcation lines; that deliver values and experiences based on the specifics of a client; and that can do that in a million different ways, from a single technology platform.