Rich millennials redefine money management

Tradition was once the hallmark of private banking. But the industry is now being forced to modernise to keep in touch with its clients, who are increasingly managing their money on the go.

 

Two thirds of the world’s current high-net-worth individuals expect to manage most, if not all, of their wealth digitally within five years and would consider moving to other banks that provide those services, according to a Capgemini and Royal Bank of Canada report from 2014. 

 

Young, rich and socially savvy

And the world’s wealthiest are getting younger, which means they are even more likely to use technology. Over the next three decades, the value of global ultra-high-net-worth wealth to be handed down to the next generation is expected to reach almost $16 trillion (Dh58.8 trillion), according to a study by Wealth-X and insurance company NFP. 

 

“Millennials [born between 1980 and the early 2000s] are probably one of those generations that are much more connected,” says Julian Vydelingum, Senior Wealth Planner at Killik Offshore. “So private banks have realised that if these people are going to be the biggest wealth generators in the region, they need to embrace the technology element. 

 

“You see many more private banks on social media, Facebook [and] Google Plus, because they know that’s millennials’ starting point for news. That gives them a foot in the door, so to speak.” 

 

According to a 2015 report by international consultancy EY, Digital Disruption and the Game-changing Role of Technology in Global Wealth Management, the industry is catching on to the digital revolution, albeit slowly.

 

“The gap between customer expectations and traditional offering provides a classic opportunity for new entrants while new technologies enable to lower the barriers to entry,” says the report.

 

And new entrants, including start-up wealth managers such as automated solution provider Wealthfront are actively “stealing” clients from established private banks, warned Hein van der Loo, Head of Strategy at Amsterdam-based ABN Amro’s private bank at a conference in 2014.

 

Gamifying investments

The threat is driving many private banks to get creative. UBS, the world’s largest wealth manager, has established a network of innovation centres to create applications and technologies such as video games and puzzles. One uses virtual reality goggles to present clients’ portfolios as cities to help them visualise their investments and work out what pieces may be missing. 

 

Credit Suisse launched a global digital private banking platform app for clients in Asia-Pacific that offers customers the chance to view their portfolios and monitor the markets, among other things. And Citi has created a platform called Citi Private Bank In View, which is mainly for mobile devices, to give people information on their portfolios, as well as offer insights and education. 

 

“The private banking industry is one that needs to adapt to new technologies, like any other industry,” says Mark Mills, Investment Counselling for the Middle East and North Africa at Citibank. “We [are] seeing technology being utilised in a number of ways. Citi is investing in this area.” 

 

Mills offers examples of how the group is doing this. It is currently testing video-based chat on iPad as well as developing other tablet applications. “[These are] actually in full test mode and something millennials will respond well to.”

 

Gain trust through tech

Knowing what millennials want is key to developing technologies that appeal to them. Because they lived through the financial crisis, many millennials have less trust in their advisers. “So utilisation of technology for us to provide more content-driven research to their smartphones, to their iPads, etc. [is important],” adds Mills. “A lot of millennials will be self-directive investors, so there is still a very significant role we can play through utilising technology to ensure they are seeing good content to support their decisions. Obviously, at the same time, that can lead you to win and earn trust from millennials.” 

 

Citi is not the only bank operating in the UAE to spot the opportunity. Mashreq’s private banking arm is also shifting towards a more digital relationship with its clients. But it is at a different stage of the journey. 

 

“While we recognise we need the client tools and reporting modules online as well as on smartphone technology, we have kind of stopped there for now and we are building a digital infrastructure internally in order to enable this journey,” says Ayman Abuhabsa, Head of Private Banking at Mashreq. 

 

“The private bank is benefiting from the broader framework being put in place at Mashreq. This involves building industry-specific tools and private client modules around that framework that will cater to specific needs of the client. We do clearly associate our ability to be successful and meeting our clients’ requirements, and exceeding them, hopefully, with how effective we are in adopting technology.”