A great transfer in wealth from aging baby boomers to younger generations is under way, and it is reshaping the wealth management industry in ways that demand greater efficiency and adaptation by incumbent firms.
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The shift to new investors is happening against a backdrop of disruption—an explosion of data, the rise of digital generations and the robo-advisors to serve them, and secular headwinds in the global economy. Generations X and Y move effortlessly across both the analog world of face-to-face meetings and the virtual world of digital platforms that enable the fast and accurate service they expect.
To move in lockstep with these young investors—to remain competitive as the future unfolds, with a burnished and tech-forward brand—wealth management firms must invest in a transformation built around a modern core banking system. And they must do it without alienating older clients, still the bedrock of their business.
To gain a unique view into the experiences of both clients and advisors as the wealth management industry faces change, Forbes Insights, in partnership with Temenos, surveyed more than 60 wealth managers around the world and 35 High-Net-Worth (HNW) clients about the evolving banking experience—how they communicate, their needs and the importance of technology. The research is presented in a recent Forbes Insights report, “The Rise of Bionic Wealth: A Hybrid Model of Cutting-Edge Technology and Advisor Expertise Heralds the Future for Wealth Managers.”
Among the key findings:
• 42% of wealth managers believe that a mix of digital and offline ways of communicating is ideal.
• 34% of HNW clients want either digital-only or a mix of digital and offline communication.
• 62% of HNW clients say that the digitization of wealth management services is good overall, but they still want to meet often with an advisor.
• 17% of HNW clients say technology is essential.
• 48% of HNW clients rate cyber risk and hacking as a top concern related to the use of technology.
• 45% of wealth managers believe detailed analysis of financial results and performance is the best way to build trust with clients.
The survey also confirms that it is largely a myth that wealthy young investors are entirely self-sufficient and that they communicate primarily through virtual channels, with little or no interest in face-to-face relationships with advisors. True, they want to make their own decisions, and they are certainly at home in the digital world; but they also want to work with one or more financial advisors to get second options and to validate their views, on the go, across any available channel.
Some other notable observations:
Investors over age 50 tend to be more focused on the security of data.
Understanding the feelings and preferences of clients on a deeply personal level is at the core of retention, the underpinning business objective for the industry.
A significant number (42%) of wealth managers surveyed believe that legacy systems are “somewhat of a problem.”
Technology is the only way forward for wealth managers in a competitive financial landscape. But communication should not be limited to virtual channels, and digitization should not be seen as a replacement for the bonds of trust formed by human relationships.
The above material was prepared by Forbes.