Like Benjamin Button, it can sometimes seem for us wealth managers that our clients are getting younger while the rest of us age. That trend is writ large across the Arab world, where an especially pronounced youth bulge has exaggerated this global shift in the profile of high-networth investors.
It partly explains why relationship-building within wealth management has become more complex and nuanced than ever before. Indeed, the parameters that defined the relationships of old may not be relevant to a new generation of investors.
We live in an age of disruption and our clients are the disruptors. So, tread carefully. By some estimates, the wealth of millennials will grow fivefold by 2030 as they inherit some $68 trillion from their parents and making them the wealthiest generation in history.
Among the forces of disruption coalescing around the industry, this huge generational shift in wealth is perhaps the most challenging, as it demands a very different approach by the advisor - or rather the ability to switch between different approaches.
Ditch the respect
Reverence for institutions, especially financial ones, is hardly a defining feature of generations Y and Z. Banks worldwide are watching while once lucrative business lines are disrupted by startups able to offer better value propositions for the consumer - many of them led by entrepreneurs from this very generation.
Advisors may find that a grandiose banking lineage replete with impressive historical references and frock coats hanging from the oak door may not be as useful in winning new business as an app that performs a banking function more efficiently from a smartphone. There are even more complex relationship dynamics at work across the Gulf economies, where the old ways of doing business espoused by the babyboomer generation compete with the technology-driven Ys and Zs within the same household.
The ability to offer tailored financial solutions to clients depending on their stage of life and investment goals is nothing new. It is part of the marketing boilerplate of every firm that operates in the industry.
Products ‘shaped’ by the client
What is new are the demands that this puts on the individual advisor, who must work harder than ever to ensure that the type and tone of the relationship suits the individual client. The advance of ‘wealthtech’, ‘robo-advisors’ and other automated services does not imply the end of the human-led relationship, but it does demand a different approach from the manager. Historically, wealth managers have offered products to their clients that have been designed to maximise value for the bank.
In today’s more competitive marketplace, advisors need to reverse that approach and devise products that are shaped more by the client. That also demands redrawing and expanding the relationship when demanded by the client.
Effective advisors look beyond how to extract maximum value from their clients and instead respond to what clients want out of them. That may involve helping to develop relationships with others working in similar fields or opening other such doors to opportunity of one kind or another.
Helping to establish such networks is one way in which wealth managers can demonstrate their own worth to a new generation of investors that may not accept their value proposition as a given. It is an adjustment for sure and one which may come easier to some individuals and firms than others.
Keeping ahead of the algorithms demands constant change. For an industry that has operated in a similar way for generations, that is a challenge that should not be under-estimated.
As Benjamin Button says: “You can change or stay the same. There are no rules to this thing.”