This article was initialy published in Private Banker International. Read the original article here.
2019 has seen persistent market volatility, growing social and environmental challenges and political uncertainty. Private banks and advisers to HNWIs are under continued pressure to remain profitable and relevant to their clients. According to McKinsey, two-thirds of European banks have experienced flat-line or negative growth in the last five years.
So, what does it takes to stay relevant in the future? In this environment, it has become increasingly important for advisers to HNWIs and their families to understand the changing demographics of modern wealth as it shifts to become more digital, more sustainably minded and more global, while its families become more complex.
In particular, with $30trn to be transferred to women and millennials in the next decade, private banks must ensure that they are able to meet the unique requirements of these individuals in order to future-proof their businesses.
Continuous innovation is crucial in that sense. However, innovation for innovation’s sake is a major pitfall, and advisers must respond to the specific needs of their clients with strategic and meaningful innovation that truly solves their challenges today and into the future.
While 2019 has seen interest in sustainable investing increase across all demographics, the desire to invest in alignment with values is particularly prominent among women and millennials – 95% of millennials and 84% of women express an interest in sustainable investing. Their advisers will need to keep pace with this new demand in order to provide solutions and opportunities that enable their clients to protect their wealth while achieving positive social and environmental impact.
Further, many millennial HNWIs are either digitally native or highly digitally literate, and with this comes new expectations towards their service providers – especially for both a customised digital and tailored personal customer service experience. Already, 62% of millennials want their wealth management platforms to actively use social media channels. With millennial wealth estimated to reach $24trn in 2020, wealth advisers will need to continue innovating and adapting to address the changing demands of modern wealth.
As the face of wealth diversifies, so do family dynamics. Managing the sensitivities and requirements of more complex family structures will be an important component of advisory services. Today’s family model is far less traditional, with fewer first-time marriages, an increase in divorces, same-sex marriages, and the dispersal of families across the globe. This greater level of complexity will require advisers to deliver strategies that are adaptable but still ensure that the holders’ wishes for succession and legacy planning are fulfilled.
Beyond specific demographics, wealth continues to globalise. More and more families are internationally mobile: 36% of wealthy individuals hold a second passport, and 48% of them are sending their children abroad to university, according to the latest Wealth Report from Knight Frank. Listening to individual needs and having the global expertise to provide unique, tailored solutions to match their internationally mobile lifestyles will be crucial for wealth advisers as their clients’ lives and interests are increasingly multi-jurisdictional.
To remain relevant and effective in 2020, private banks and the advisers to wealthy individuals will need to invest in really understanding these changing, nuanced needs of their clients, and deliver service excellence throughout their value chain: whether it is when supporting them to invest sustainably, innovating to offer enhanced digital capabilities, or providing the expertise and sensitivity to support globally mobile lifestyles and complex family dynamics.
Executive Director, Sales and Wealth Structuring Solutions
Lombard International Assurance