Your Firm Will Lose the Next Generation: Exploring Multi-Generational Wealth


September 26, 2019

“We all know millennials are on the radar. There is no question, it’s one of the largest transfers of wealth in history. Wealth firms need to act now to get ahead of the millennial curve.”
– Steve Scruton, President, Broadridge Advisor Solutions

Wealth Management firms have spent decades building themselves up in the industry by focusing on the needs of Baby Boomers but are woefully unprepared for the intergenerational wealth transfer to Gen X and especially millennials.

This creates a multitude of new challenges, especially for traditional firms, which have to consider that the age of advisors is increasing, leading to a disconnect between their methods and the younger generation’s expectations. There is also a fundamental difference in attitude between boomers, who prefer an advisor-led model, and millennials who prefer to take the reins via Robo Advisors and other digital channels.

Boomers Are Transferring Wealth to Their Children

Over the next thirty years in the US, $30 trillion in assets is going to be passed on from Boomers to the next generation. And most of it probably isn’t going to stay with the same investors. It may be difficult to plan for potential future income of the next generation when most of your income comes from your current clients, but picture what your firm would look like if it lost two-thirds of its clients virtually overnight. That’s what you have to protect against.

Millennials (And Gen X) Prefer Digital

It’s no secret that millennials prefer digital technology, both in their personal lives and in how they manage their finances. It’s not just more convenient, it’s embedded in their lifestyle. Consider that, according to Deloitte’s 2018 Global Mobile Consumer Survey, consumers look at their phones an average of 52 times every day.

Overwhelmingly, millennials prefer investing through digital means and are willing to take their money elsewhere if firms can’t meet their expectations. A report from Oracle found that digitally advanced firms report an 8.6% increase in revenue, an 11.3% rise in productivity and a 6.3% improvement in market share.

In the next few years, some 80 million Millennials will come of age financially to make up what is likely the largest, wealthiest generation in U.S. history – bringing their digital appetites with them.

As we’ve previously written, Robo Advisors are on the rise and will soon pose a very real threat that traditional firms need to account for. A large reason for this is that Robos en masse are appealing to millennials. They provide low-cost portfolio management, a fast and intuitive account sign-up process, and they provide a digital, user-friendly interface.

Millennials are accustomed to doing their shopping online, banking through mobile, and using digital means for everyday applications. If their parents’ advisors don’t offer the services that the new generation is comfortable with, they will look elsewhere.

Create a Digital Strategy

Creating a digital strategy means starting with simple goals like implementing a paperless, convenient, automated onboarding platform that can show young potential clients upfront that you care about the future of the industry and that you care about their preferences, giving them confidence in your firm while you continue to adapt for the digital age.

According to a study by Deloitte, 57% of millennials would “change their bank relationship for a better technology platform.” This can include developing a multi-channel approach that allows millennials to interact with your firm through mobile, tablets, and social media, allowing them to access your services as an extension of their everyday habits.

Many millennials also feel under-educated regarding finance and prefer firms which help guide and teach them along the way. 84% of millennials seek out financial advice highlighting the need for firms to take initiative and provide digital channels for that advice. Engage with this need through hosting a blog, explainer videos, electronic newsletters, or a vibrant social media presence. This establishes a relationship with your clients (both current and future), building up loyalty and conveniently communicating with them on their level rather than putting the impetus on them to change for you.

It may also be tempting to try to attract the next generation by embracing the Robo Advisor model completely, but this would be a mistake. While millennials overwhelmingly prefer digital models, most studies show that they still want human connection, which also happens to be what traditional firms have to their advantage. In fact, 82% would appreciate more personal meetings with their advisors.

You’ll need to pursue a model that allows for digital growth without compromising the strategies and methods that have got you this far; improve and update your client onboarding process and how your firm operates digitally, without compromising your connection to the next generation. Learn how to leverage new technologies alongside your existing infrastructure, creating a cross-generational user experience that can draw millennials away from the Robos and keep their inherited wealth with you.

In a recent report on “Targeting the Digital Generation”, Broadridge outlines steps firms can take to start winning the loyalty of millennials, including:

  • Putting technology at the center: Leverage the power of technology to offer the type of service that millennials are seeking.
  • Making it omni: Choose technology that will allow for quick and easy improvements to features, functionality and the overall client experience. Plan for flexibility and avoid processes that are “locked down.”’

eBook: Creating a Paperless Wealth Management Firm

In order to connect with the next generation of investors, you need a robust digital strategy that starts with a paperless client onboarding process and integrated back-office processes.

Download our complimentary eBook to learn more.

Download eBook

Remember that millennials are only the first generation of digital natives: the next one is right behind!