April 16, 2024 , in technology


Wealth Management: The Generation Gap

Tens of trillions of dollars in assets is expected to pass from wealthy baby boomers to Millennial and GenZ heirs over the next few decades. What will this new generation of investors expect from their financial advisors and what role will technology play in serving them?

Eidosmedia Wealth Management

Wealth Management | Eidosmedia

Boomers are aging, and over the next couple of decades, Millenials and Gen Z heirs stand to inherit the wealth those Boomers built. We’re about to see what is heralded as “the biggest wealth transfer in history.” Meanwhile, we know that, historically, 90% of those inheriting a large wealth portfolio change financial advisors. 

Savvy wealth managers are preparing for the day when Boomers’ heirs start looking for help managing their new-found fortunes. As this money comes flooding into the market, how can wealth managers attract clients of entirely new — and very different — generations? Eidosmedia explores what Millenials and GenZ seek in a wealth management partner.

Decoding new-generation demands: what attracts investors today?

Over the next 20 years, experts predict that roughly $70 trillion in assets will move from one generation to the next through the 'Great Wealth Transfer'. The Intergenerational Wealth Report surveyed 500 people, split between Gen Z and Millennials. As the Financial Times says, the report found a fifth said they would not leave their inherited assets with the same advisor. Only 4% said they would stick with the same asset manager.

It’s also important to note that these generations have come of age during times of great financial and social upheaval. From the 2008 recession to pandemic-driven uncertainties, Millennials and Gen Z have come of age in a very different environment than the relative stability that Boomers enjoyed in the 1980s and 1990s. And age isn’t the only factor at play. Women increasingly control more wealth.

So, the question remains: What are they looking for? Here are a few key takeaways.

Time is an obstacle to financial planning

While Millennials and Gen Z have similar attitudes, they differ wildly from their Boomer family members. In fact, research found that one of the main obstacles for Millennials and GenZ is simply time. As Business Insider reports, “Younger generations were considerably more likely than others to be put off from creating financial plans because of the amount of time, money, and perceived effort involved, the survey found.” Three times more Millennials than Boomers said they did not have enough time to develop a financial plan.

Building wealth is still important but so is the impact

While Millennials may not feel like they have the time to put together a financial plan, it’s Boomers (66%) who say time is more important than money. Only 56% of Millennials agreed, though that may be because they don’t yet have wealth, while Boomers are already enjoying the fruits of their labor. However, Ida Liu, Global Head of Citi Private Bank, told Forbes, “They like to invest with impact and purpose. They care about doing good. In the next 10 years we won’t be talking about impact investing as a separate sleeve. It’ll be at the core of how the next generation and women invest.”

Keeping up with the Joneses

While Boomers may also be known as the “Me Generation,” it’s Millennials and Gen Z who are concerned with keeping up with the Joneses — due, no doubt, in large part to social media. These younger groups were almost twice as likely to say being able to afford a similar lifestyle as their friends made them feel wealthy. Gen Z took that even further, and are four times as likely as Boomers to compare their lifestyle to friends and family on social media.

Technology, technology, technology

While Boomers may have wanted to meet with their wealth management advisors in person, receiving a quarterly statement in the mail, Millennials and Gen Z demand access to technology. “They want digital solutions that allow for instant self-service, hyper-personalized communication, and digital engagement,” according to InfoSlips. “They are comfortable with and prefer online platforms for managing their wealth. This includes everything from online banking and digital investment platforms to AI-powered advisors and mobile apps.” This makes sense, not just because these generations are digitally native, but when time is a concern (as it seems to be for Millenials) technology is often a solution.

Different asset classes

Technology doesn’t just figure into how younger generations want to manage their wealth, it influences what they want to invest in. For instance, InfoSlips reports that while 71% of High Net Worth Individuals (HNWIs) have bought cryptocurrencies, that number goes up to 91% for HNWIs under 40.

Tailoring wealth management: strategies for the new generation

When one starts digging into what drives Millennials and Gen Z with financial portfolios, technology quickly emerges as a theme. From tools to help them manage their money more efficiently to social media-driven expectations, tech figures prominently in their expectations.

Refinitiv’s Wealth Management Report found 46% of investors use their mobile app to access account information. For Millenials, this rises to 72%.

While compliance and security are always concerns for highly regulated industries like banking, compliance is no excuse to eschew technology. A report from Unblu suggests, “To overcome this challenge, wealth management firms can integrate popular messaging platforms into a secure, omnichannel environment. Beyond ensuring convenience, compliance, and data security, these integrations can enhance the overall experience as it’s easier to move seamlessly across channels.”

At this point, mobile apps are table stakes, but the use of artificial intelligence to augment human efforts is where wealth managers can stand apart from the competition. Nageswar Cherukupalli, Head of Banking and Capital Markets at Cognizant told Forbes, “Our recent survey of 250 senior financial services leaders regarding their plans for Generative AI suggests that the clock is ticking on AI’s ability to deliver value. Almost half of all respondents expect 2024 to be the year when value really shows up, and another 40 percent say it happens in 2025. The implication is that AI technology needs to be progressing rapidly.”

Revolutionizing investor engagement: the tech-driven hands-on approach

The good news is, a human touch is still needed. “Wealth managers must thoughtfully blend automated solutions with high-touch customized advice,” writes Richard Winston, Financial Services Global Industry Lead at Slalom. “Hybrid models that leverage predictive analytics while preserving human relationships and judgment represent the future.”

This kind of hybrid approach represents the future of personalized investment management, and it’s what firms will need to achieve to attract and retain future investors.

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