An IMGW New Report
Securing young clients is essential for the future success of private banks and wealth managers
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Wealth Transfer and Emerging Self-Made Wealth
Between 2021 and 2045, nearly $85 trillion in wealth is expected to be transferred from older generations to their heirs, according to Cerulli Associates. Heirs of high-net-worth individuals—those with at least $1 million in liquid assets – are already receiving over $500 billion annually, a figure projected to reach $1 trillion annually within a decade. Additionally, the number of self-made millionaires is growing rapidly, including those who have founded companies, earned large corporate bonuses, or secured lucrative sports or music contracts. This presents a significant opportunity for private banks and wealth management firms.
“Banking experts suggest that less than half of their time with clients is spent on investment discussions; the majority focuses on critical non-investment issues like family dynamics, inheritance planning, and education for the next generation.”
Challenges and Strategies for Attracting Young Clients
Data from Cerulli shows that over 85% of inheritors seek financial advisers different from their parents. A PwC survey reveals that 46% of wealth customers plan to change or add financial advisers within the next two years, and 38% have already done so.
Private banks and wealth managers, such as UBS and Goldman Sachs, have adapted by employing larger teams that include younger staff members. These younger advisers focus on building relationships with the next generation and prospecting for new clients. While not immediately profitable, these efforts are crucial for long-term success.
Morgan Stanley leverages its employee stock plan management business to create accounts for recipients, gradually offering personalised services as the accounts grow. This early engagement helps establish relationships before individuals become high-net-worth clients.
Relationship Building and Personalised Service
BNY Mellon, with a long history in wealth management, emphasises the importance of building lasting relationships. They organise family meetings to discuss various aspects of wealth management, including business operations, shared properties, and charitable giving. A senior wealth strategist notes the importance of becoming part of the family’s life through these engagements.
Banking experts suggest that less than half of their time with clients is spent on investment discussions; the majority focuses on critical non-investment issues like family dynamics, inheritance planning, and education for the next generation.
Goldman Sachs offers a range of “wrap-around services,” connecting clients with vetted providers for eldercare, insurance, and tax planning, recognising the need for comprehensive support for busy, affluent individuals.
Digital Engagement and Human Connection
While private banks and wealth managers are enhancing their digital offerings to provide easy online access to money and personalised content, the value of human interaction remains paramount. A Morgan Stanley executive asserts that despite advancements in digital services, clients still desire personal, emotional connections with their advisers.