Past Performance is not an Indicator of Future Results

Companies in wealth management and investment services say this to customers all the time, but the very same applies to the customers themselves.

Recent research into the way High Net Worth Individuals regard their wealth managers highlights the difference between the traditional HNWI and the younger wealthy cohort.

Generally, the wealth management industry is not aligned at all well with the needs and concerns of younger HNWIs. Getting trust of younger clients isn’t what it used to be and firms, from banks, to pension providers to wealth managers, need to radically reassess the traditional ways of nurturing and growing these relationships.

Do people just turn into their dads?

And yet it seems obvious that understanding the awareness of the preferences and expectations of younger (under 45) HNWIs is increasingly important, given the heavy influence they will have in coming years. Perhaps they’ll just turn into their parents? More likely they won’t, definitely not if they’re women – these days more likely to be inheritors of wealth or wealth creators in their own right.

Less Loyal or More Discerning?

As it happens, younger HNWI people are more likely to seek professional advice about many more things than their parents, and this represents a natural engagement opportunity for wealth management firms. Yet wealth managers run the risk of missing this opportunity, which will in turn put their business at risk.

A critical factor is that it appears that more young HNWIs have relationships with multiple wealth management firms and keep a lower percentage of assets with their primary firm. Add to this the fact that they view their relationship as primarily with the firm (as opposed to the individual wealth manager), even though it appears that they place higher value on a referral leading to an initial introduction to a wealth management firm. So brand reputation is king.

Younger wealthy clients are also rather more likely to switch between one wealth manager and another too. Working with other professionals, including those from other firms will become more important for wealth managers, given the propensity of younger HNWIs to work with multiple institutions. To offer differentiating services, wealth managers must also act as conduits to a broad range of capabilities, both inside and outside of their firms.

Customers Just Aren’t What They Used to Be…

So how to capture and nurture this all important market?

1. First and foremost, understand that young people need, demand a strong investment performance – which is rather different from the ‘don’t loose the farm please’ objectives of the typical older HNWI client.
2. Certainly having a basic presence online is not enough and wealth management companies must have a solid presence both offline and online to take advantage of the strong preference of young HNWIs for word-of-mouth referrals – if you’re digital ‘estate’ isn’t up to scratch, you may well be being discounted without even knowing about it.
3.  Understand what’s important to them particularly around their risk tolerance - as opposed to the box ticking exercise that seems to prevail
4. Offer easy access to services 24/7/365, when where and how they’d like to engage. (Generally not between the hours of 8am and 6pm Monday to Friday, definitely online and via their mobiles if they so choose). Meetings need to be a convenient, relevant and effective use of their time.
5.  Make sure that the wealth management service has the genuine ability to refer and engage additional experts.
6.  Exceptional service delivery. e.g. high-quality research and support services - young HNWI have extremely high expectations that their customer service related issues will be resolved quickly and effectively.
7.  Complete fee transparency: it may seem obvious but from the outside, so many wealth managers appear to obfuscate unacceptably.
8. Strong brand reputation (don’t underestimate the importance of this as a short-hand for their trust)
9.  Comprehensive product and solution availability.
10. Detailed information and statements that are timely and accessible in real time and overall reporting quality; smooth account-opening procedures, and wide geographic reach. ?

 Do you approach and manage the next generation of clients differently?

For more insights and a really fascinating read with a global perspective, read the Cap Gemini/RBC World Wealth Report 2015 

Philip Browne  is a leader in wealth management, investment services & pensions. An expert in translating digital innovations into customer value, he is responsible for masterminding the exceptional growth of several financial services brands.