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Keeping the trillions of family wealth: How to win next-generation clients

The coming decade will witness an unprecedented shift of trillions of assets to the generations that follow the baby boomers. Ian Woodhouse, head of strategy and change at Orbium, explains why wealth managers must overhaul their services to keep pace with a younger market.

Over the next decade, wealth managers face a looming challenge: a massive transfer of asset ownership from existing, ageing “baby boomer” clients to the next generation. This “wealth in motion” will trigger an unprecedented and fundamental shift in the client base, with the consultancy EY suggesting that more than 80 per cent of family-owned businesses worldwide will change hands in the next decade[1]. In the UK alone, a 2019 survey of wealth-management clients by the investment company Brooks Macdonald[2] found that they anticipated transferring around £327 billion of assets to younger family members by 2029.

The challenge is compounded by a rapid slowdown in the growth of managed wealth. According to Boston Consulting Group[3], the annual rate of increase of personal wealth under management fell from 7.5 per cent in 2017 to 1.6 per cent last year. This slowdown looks set to continue as clients become increasingly risk averse amid uncertainty about the impact of a range of political and economic issues, from the escalation of the US trade dispute with China to signs that the bull-run cycle may be ending.

In this difficult global market, wealth managers must develop strategies to retain next-generation clients, whose loyalty cannot be taken for granted. The key to success is to understand that many Gen X, Gen Y and millennial clients will want to manage their assets differently from their baby-boomer parents and grandparents. Seen in this light, the challenge of wealth in motion is also an opportunity for the smartest wealth managers to make themselves indispensable to younger asset owners, who will need expert guidance in order to conserve and grow their inheritance in volatile, uncertain times.

Leaders and laggards

At Orbium, we see a widening gap between industry leaders who are seizing this chance and those trailing behind. To understand what the winners do differently, we have launched a comprehensive research project in collaboration with major wealth managers. Based on our initial feedback, we have identified a series of critical insights and actions as wealth in motion gathers momentum.

Firstly, wealth managers need to grasp that the era of advising baby boomers on relatively stable, predictable asset flows is over, given the prospect of continuing global political and economic turbulence. Additionally, next-generation owners are likely to be more diverse, and have more nuanced demands, than their predominantly white, male forebears. One obvious example is the emergence in recent decades of wealthy, active women investors, not only in Western societies but also in more socially conservative Asian and Middle Eastern countries.

The most successful wealth managers will also be attuned to how the demands of next-generation clients will vary between emerging and mature markets. In Asia, the most significant asset transfers will be from first- to second-generation clients who are already displaying a marked preference for entrepreneurial wealth creation over investing in financial markets. In Europe and North America, environmentally conscious Gen X, Gen Y and millennial clients are driving the growth of ESG investments. At the same time, low or negative interest rates in Europe are intensifying a search for greater yields, with younger owners increasingly attracted to hard asset classes such as infrastructure and real estate.

At an operational level, our research suggests that wealth managers must adopt four key short- and medium-term business insight and technology innovation actions to build successful, long-term relationships with next-generation clients:

  • Broaden expertise: a narrow offering of asset classes is no longer adequate. Wealth managers will require capability across the full investment landscape, with expert coverage extending to property, ESG and other alternative asset classes.
  • Leverage existing relationships to develop deeper insight: managers should act as trusted advisers ahead of clients making wealth transfers. It is important to gain deeper client insight, not just of current wealth owners but also access to, and insight on, their next-generation heirs. This enables guidance to be offered to both on issues ranging from succession to wealth- transfer planning, along with support for heirs to cope with managing significant inheritances successfully.
  • Harness existing technology: channels such as smartphones and web enable improved digital service models more suited to next- generation clients. Digitalisation also reduces costs, increases speed to market and maximises scalability.
  • Exploit emerging technology innovation: artificial intelligence (AI), machine learning and other advances are also transforming how wealth managers serve clients. In particular, analysis of greater volumes of high-quality data enables more targeted personalisation and advanced risk-management solutions.

Early leaders: the winning difference

There are already emerging success stories in the new wealth environment. For example, Coutts is focusing on new money from entrepreneurs and from multiple generations to complement its traditional money business; new clients are up 13 per cent in the first half of 2019. Credit Suisse has also boosted its new money intake through its “bank for entrepreneurs” concept, underpinned by digital technology. Lombard Odier is reaching out to younger, eco-aware clients with its advocacy of environmentally sustainable investment.

One fact is already clear as the industry enters next-generation territory. The logic of wealth in motion dictates that wealth managers cannot stand still, relying on outmoded business models designed for an era of traditional wealthy clients. Over the next year, Orbium will report back regularly on our research into how a rising cohort of younger, diverse, highly demanding new asset owners will impose radical change on the industry models.


[1] Vontobel Wealth Management Inspiration magazine, 2018

[2] https://www.brooksmacdonald.com/insights/intergenerational-wealth-transfer-rising-challenge

[3] https://www.bcg.com/publications/2019/global-wealth-reigniting-radical-growth.aspx

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