According to a yet-unnamed recent survey, this represents a historic turning of the tides in wealth management preferences among the future heirs to millionaire fortunes. An astonishing 81% of young investors are looking to seize control and fire their parents’ wealth management firms. They are hungry for aggressive growth strategies. This is a complete 180 from the wealth preservation mindset that baby boomers frequently adopt.
The report’s results highlight a notable generational divide in investing philosophies. A baby boomer might be most concerned with preserving their wealth. The next generation is more likely to want to take advantage of new growth opportunities. This transition has been accompanied by an increasing need for advanced technology.
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Younger investors are increasingly turning to mobile apps to manage their portfolios instead of more conventional approaches.
The survey shows a major divide in communication preferences too. About 78% of baby boomers still want in-person meetings with their wealth managers. Next-generation investors prefer digital communication and demand easy access to their financial data. In fact, technology is even more important to millennials, two-thirds of whom expect sophisticated digital options from their wealth managers.
According to Kartik Ramakrishnan, global head of financial services at Capgemini, it’s imperative that banks pivot to accommodate these changing consumer preferences. He advises wealth managers to understand that the new generation of investors has only ever known a digital-first experience.
“The new generation grew up following people, not companies.” – Josh Brown
This change in the investor landscape calls for a new approach that younger investors now expect personal and authentic communications from their wealth managers. They would much rather do business with people who share their values and dreams than a giant duplicitous company. As Ramakrishnan intonates, old ways of engaging with a client might not just cut it.
“It’s not just putting out these huge reports that talk about the impact of interest rates and what is happening with the market,” Ramakrishnan explains. “That’s hard for people to consume. It’s got to be something that’s simplified, that people can pick up and something that’s actionable.”
That desire for more personal and tailored communication is driving next-gen investment decisions, too. A staggering 88% of surveyed investors indicate that this cohort shows more interest in private equity compared to baby boomers. The growing availability of private equity investments is driving this curiosity. Lower minimums and the availability of third-party asset managers have made these investments more accessible than ever.
Younger investors understand instinctively that you can’t deliver the same kinds of returns you used to just with stocks and bonds. Further, they are testing the waters in new asset classes, such as private equity and cryptocurrency. Yet two-thirds of wealth managers admit they lack sufficient investment vehicles for the emerging asset classes. Which raises an interesting question about the level of service they provide to younger clients.
Ramakrishnan explains that this generational shift has both age and risk propensity, and awareness of different investment strategies.
“It’s a combination of both age, risk propensity and awareness,” he states.
Next-generation investors are demanding more than quarterly portfolio reviews. Consumers expect, and demand, real-time access to all of the information about their finances, aggregated in one view. Further, they want intuitive tools that make decision-making a breeze and transaction capabilities to keep them safe when working online.
As Ramakrishnan observes, “It’s the ability to find out more, to learn more, to get better knowledge of how they could invest.” These kinds of insights are increasingly essential, especially as wealth management firms look to establish long-term relationships with younger clients.
In short, wealth management is in the middle of a fundamental shift led by the preferences and expectations of next-generation millionaires. Wealth managers will be challenged to think differently than they have before. Now more than ever, clients can choose their advisors based on a tailored experience and high-end digital capabilities.