Insight

Financial Institutions and Wealth Management for a New Generation

The wealth management industry is undergoing significant changes due to shifting demographics. Their client base is living longer, with increasing demand for wealth advisory services. More importantly, their heirs are the rising generation of Gen X and Y affluent investors. These individuals have expectations and preferences which are markedly different from other customer segments, shaped by their digital and fintech experiences, and having lived through both the financial crisis and the pandemic during their formative years.

The Asia Pacific region is the world’s second-largest wealth hub, according to the latest Knight Frank wealth report. It is expected that the billionaire population in the region will rise more quickly than the global average (33.7%) at 36.7% over the next five years. By 2026, more than a third of the world’s billionaires will be from the region.

To effectively meet the aspirations of young affluent investors, financial institutions are rethinking their services and products.  Their tech savvy clientele isn’t just accustomed to using digital apps, but also expect highly personalized advisory solutions.

To this end, wealth advisors are focused on gathering an in-depth understanding of their clients with the intention of   shifting their wealth advisory models from a product-centric approach to one that is customer-centric, with the help of AI, advanced analytics, predictive modelling, customized insights and robo-advisors.

Transforming the wealth value chain with digital solutions

Shifting expectations require solutions that enable financial institutions to digitally transform their wealth management value chain and processes, investing in digital tools to engage these clients early in their customer journey, and likely without requiring a face-to-face meeting.

Automating some tasks, such as Know Your Customer (KYC) and Anti-Money Laundering (AML) processes, saves time for customers and also frees up wealth advisors to focus on higher value-added work, whether client portfolio management and rebalancing, or tailoring advisory to specialized client requests.
 

Addressing Expectations for Now, and the Future

New-generation wealth customers have their own expectations and pain points. Think of busy professionals and young parents balancing family and work commitments.

According to a recent Publicis Sapient survey, 89% of investors prefer to invest using a mobile app, but also value face-to-face meetings. Amongst the 500 investment providers and 2,300 investors surveyed, 46% of the millennials who responded said they preferred both of these interactions.

Some wealth clients are extending their advisory needs to cover families, for example, with integrated services for estate planning, taxation, investment and protection for the family, as well as savings for retirement and children’s education. Wealth advisors who are in a position to know their clients well enough to anticipate such needs are placing themselves in a position to win over future generations of business.

Emerging Needs of New Generation Wealth Clients

Wealth clients are increasingly interested in robo-advisory and automated portfolio tools that enable them to set up their own portfolios and have a hands-on approach to their investments. New wealth clients are also approaching investments differently; monetary returns aren’t the primary motivation for many, with cause-based and thematic investments factoring just as heavily. As such, wealth advisors are aware of emerging needs as well as the personal causes and interests of their new wealth customers.

For example, an investor may prefer to focus on, companies in the increasingly important ESG space, instead of being bound by conventional sectoral, geographical or industry classifications.

Digital assets, non-fungible tokens (NFTs), the Metaverse or in-game properties and collectibles are other alternative assets that investors are eyeing up, not just for short-term gain but also with the long-term view of diversifying their portfolios.
 

How Financial Institutions Can Respond to Changing Industry and Client Needs

Customer-centricity today is about understanding individuals who are constantly evolving, quite unlike the categories that wealth institutions often use to classify their customer segments. For example, how can wealth institutions help their customers seek high growth opportunities in investments while also having long-term placements in assets that fits their environmental, social and governance aspirations?

Setting up an innovation team is one way in which wealth institutions can explore digital solutions. Partnerships with fintech companies can be fruitful and expand capabilities and service offerings. For example, UBS set up its UBS Next in 2020 to accelerate their innovation efforts, while private bank Julius Baer  set up its Launchpad product in Singapore focusing on innovation and fintech partnerships.

As digitally savvy and affluent investors continue to adopt new ways of investing, wealth advisors can grow and develop alongside their clients and inspire confidence with a flexible and customer-centric approach.