- $68 trillion in assets will transfer to younger generations over the next 30 years.
- Insider Intelligence looks at how the HNW investor-wealth manager relationship has changed in recent years and how it will evolve amid this massive generational wealth transfer.
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With $68 trillion in assets set to transfer to younger generations over the next 30 years, wealth managers who target high-net-worth individuals (HNWIs) must adapt by using digital solutions to enhance their existing white-glove services—not replace them.
HNWIs’ higher volume of assets versus other demographics requires a special approach from wealth management companies. Despite the recent democratization of investing, HNWIs still stand out from other demographics, as they require more in-depth portfolio advice on a wider range of asset classes like real estate or, as of late, cryptocurrency. Insider Intelligence highlights how that influences what they want from wealth managers.
HNWIs’ complex financial situations demand more tailored service with greater attention to detail than one-size-fits-all wealth managers can provide. This human touch is the secret ingredient to HNW wealth management, as it allows clients to tap and be guided by expert advice that is personalized based on a thorough understanding of their individual preferences and financial situation.
But wealth managers aren’t consistently delivering this level of service. More than half of HNWIs surveyed by Gartner lack proactive support from their providers. This is a missed opportunity for wealth managers: In a 2019 YCharts study, 66% of HNWIs infrequently contacted by their financial advisor said that more frequent communication would increase their confidence in their advisor and financial plan.
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Digital—to a point
Fintechs and other tech companies are changing consumer expectations around financial services, and HNWIs are no exception. Most fintechs target the mass market—upcoming exceptions include Alpian, a Switzerland-based private bank for the mass affluent, and 220, a private bank aimed at millennial millionaires. But as they become increasingly powerful in the financial services industry, fintechs are fueling consumers’ expectations of having an arsenal of digital financial tools at their disposal. This is further amplified by tech companies’ slick digital apps and dashboards pushing consumers to expect services being one click away.
The pandemic only amplified this trend. According to a November 2020 survey from FactSet in association with global professional services firm Aon, 54% of HNW clients’ wealth management activities worldwide took place online during the height of the pandemic. And 50% of respondents said that digital wealth management is a better use of their time.
But too much digital can alienate HNW clients. A scant 25% of private banking clients in Europe want a fully digitally enabled private banking journey, with remote human assistance when needed, per a Q1 2020 McKinsey study. By contrast, 71% prefer multichannel interactions, suggesting that while the pandemic may have opened the door to digital, there is ample room and demand for personalized experiences.
HNWIs—especially younger ones—are willing to pay wealth managers for the higher-touch service they expect. More than half (55%) of HNWIs ($1 million to $5 million in investable wealth in this research) ages 39 and younger are willing to pay for value-added services, per Capgemini’s 2020 report.
But wealth managers must tread carefully: Legacy fee structures may be outdated. Just 32% of clients reported they were uncomfortable with the fees charged by their wealth managers, per Capgemini. Surprisingly, their top concerns were transparency (49%) and value delivered (44%), rather than fee levels themselves (43%)—further supporting that HNWIs are willing to pay if fees are understandable and justified.