Simon Clarke: Why old-fashioned wealth managers should ‘think of the children’

Wealth managers must keep up or risk losing out in the face a new generation of tech-savvy investors

Photo by Andrew Neel on Unsplash


More than a quarter of high-net-worth (HNW) individuals’ children cut ties with the wealth manager used by their parents when they inherit, a report from research firm GlobalData recently suggested. To avoid this fate and make the most of a clear opportunity for new business, wealth firms need to ensure they adapt to meet the needs and expectations of tomorrow’s tech-savvy and more demanding investors.

According to the GlobalData report – titled Intergenerational Wealth Transfer: Seizing the HNW Opportunity – a mighty $8.6trn (£6.7trn) of global HNW wealth will pass down generations over the next decade.

Unlike their parents, the younger family members receiving this money are likely to have grown up in – or at least have lived much of their lives in – an era of global digitalisation. Having matured alongside the internet, most, if not all, of them now live many aspects of their lives digitally – be it entertainment, shopping, communication or even hailing a cab.

Younger HNW individuals are not like their parents

As GlobalData’s report highlights, this upbringing has also influenced the values held by tomorrow’s investors, with younger HNWs placing much more emphasis on social media and digital channels than their parents. Similarly, the report found that HNWs under the age of 40 are more likely to work in ‘new’ industries given renewed prominence by technology’s rise, such as media and telecommunications.

As with their career choices, when it comes to their personal finances, the next generation’s expectations have also been heavily influenced by their digital experiences. Specifically, the rise of mobile and internet banking means younger wealth management clients now expect a fully digitised offering.

Old-fashioned approach

As an example, we know of one retired client who loves the chance to visit his bank to chat about markets and his investments. In contrast, his daughter – who will soon take control of the family account – hates the old-fashioned approach to investment updates. While she wants the ability to speak with an adviser when required, she also demands 24/7 digital access to real-time reporting, assessments and portfolio overviews wherever she may be.

In years past, the wealth management sector has lagged the rest of the world when it has come to embracing technology. Indeed, a 2016 industry report by PwC found just a quarter of wealth managers offered digital channels beyond email – despite more than two-thirds of HNW’s using online and mobile banking at the time. With GlobalData now finding a sizeable 28.3% of HNW clients’ children discontinue the relationship with their parents’ wealth manager upon inheriting, this attitude no longer cuts the mustard.

Digital-shy firms risk a client exodus

Those wealth managers who cannot meet the digital needs of the next generation of investors risk becoming less relevant, less competitive and, ultimately, facing a client exodus. Conversely, those firms that integrate technology into their offering not only reduce the risk of losing existing client relationships – they prime themselves for picking up the business lost by less tech-savvy peers.

‘Going digital’ is no doubt a daunting task for wealth managers. Aside from the high cost of developing an online service in-house – both in terms of finance and time – the rise of low-cost robo-advisers has priced many established financial institutions out of the lower end of the market.

One way of sidestepping this issue is to place the task of digitisation into the hands of a specialist wealth technology provider. These firms dedicate themselves to creating online solutions and are often led by experienced teams and advanced algorithms that can deliver a low-cost, market-leading product in a short space of time.

Such solutions can easily integrate into a wealth manager’s existing systems and advisory processes. As such, wealth managers who outsource can leapfrog their competition with a product that is both more sophisticated than a robo-advice service and cheaper and quicker-to-market than one developed in-house.

As the amount of wealth being passed down to the next generation of investors continues to rise, wealth managers cannot afford to get left behind. Thanks to the rise of ‘off-the-shelf’ wealth technology solutions, keeping up with the tech-minded new clients has never been easier.

Simon Clarke is chief commercial officer at Tiller Technologies


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