Private View Blog: Private banks must find competitive edge to win over millennials
Tech-savvy and socially conscious millennials will be the beneficiaries of the greatest wealth transfer in history, estimated to reach $30tn over the next three to four decades.
Yet, private banks are not doing enough to attract and retain this lucrative customer base, which will make up 50 per cent of the total global workforce by 2020. Sixty per cent of millennials, those born between 1981 and 1996, are not happy with their current wealth management services, according to a global study from strategy consulting firm Simon-Kucher & Partners. And 50 per cent of clients who have recently received a large wealth transfer, or expect to inherit soon, have moved assets to a new provider in the past three years, shows research from EY. Fintech firms and independent providers are expected to gain the most.
To survive, private banks must rethink their offering, and sharpen their competitive edge to win over millennials and keep them as customers. While many of them have started their journey towards digitalisation and sustainable investing, themes particularly dear to the younger cohorts, a lot more needs to be done. Wealth managers should view switching trends as an opportunity to rebrand themselves and gain new clients, believes April Rudin, the New Jersey-based wealth marketing strategist.
A smart segmentation based on behaviour, values and lifestyle is surely more effective than one based on age, gender or risk profile. Wealth managers should stay away from launching “cool” products for millennials, or “pink” products for women. To gain millennial’s trust, private banks need to demonstrate transparency and authenticity, beyond clichés and mission statements.
“It is all about the messaging and brand appeal,” states Ms Rudin. Millennials, who have seen their parents financially damaged by the financial crisis, expect clear answers to their questions about pricing, and no more statements like “we offer free services”. It is encouraging that in Canada, wealth management firms have started publishing the fees they charge on their website.
Private banks may want to assess the effectiveness of their expensive next gen education programmes. These offer new generations the opportunity to meet their peers and create virtual or real communities. But it is uncertain to what extent they really help banks engage with their clients’ children, she believes. Also, as the wealthy increasingly value the relationship with their financial adviser, private banks need to devise new pricing models for holistic services, including philanthropy and succession planning, and package them up, enabling clients to shop and compare different solutions.
Private banks importantly need to learn from brands which millennials love, such as Apple, Amazon or Netflix. Big tech brands offer true omni-channel platforms for customers to engage with them and, acting as problem solvers, greatly improve the client experience.
Large tech firms entering the financial services sector may be tempted by the possibility of partnering up with banks, to acquire a banking licence. Competition is going to come from unexpected places. Private banks need be ready for change, be nimble and modular, and embrace new partnership opportunities.
Elisa Trovato is deputy editor of Professional Wealth Management. Follow her on Twitter @elisa_trovato
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