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Four steps to acquiring millennials for wealth management


According to recent census information, the millennial generation now outnumbers the baby boomer generation. While the youngest millennials have yet to enter the workforce, the oldest in the group are in their early 30s, acquiring wealth, buying homes and starting families. In the coming years, this generation will be the recipients of the largest wealth transfer in history, inheriting more than $30 trillion over the next few decades. Yet, two-thirds of these millennials will fire their parents’ financial advisor after receiving this inheritance.

Wealth managers must act now to capture the millennial demographic and keep them as clients as their wealth increases. However, this generation’s attitudes toward financial products and services, and their relationships with their banks, differ dramatically from previous generations. To capture this market segment, banks must better align their financial offerings, services and even their delivery models to better meet millennials’ expectations.

The millennial generation are not only digital natives; they have also grown up in an era of greater consumer choice than any previous generation, which can make it difficult for a financial institution to gain their loyalty. Today, 55% of clients with $500,000 or more in investable assets work with three or more financial firms. These split loyalties will become even starker as the millennials accumulate their wealth. They are a group accustomed to self-service, digital transactions that don’t require interaction with a live person. With access to plenty of free financial advice and tools, many millennials wonder why they would ever need a financial advisor. Wealth advisors will need to make “competing with free” a part of their strategy, without engaging in a “race-to-zero” in regards to fee structures.

By implementing Internet of Everything (IoE) platforms such as video collaboration, robo-advisors, predictive analytics, and mobile applications, banks can acquire new millennial clients on the client’s terms and develop relationships with the millennial children of existing clients to get ahead of the wealth transfer curve. Here are some suggestions for capturing the millennials as wealth management clients:

Create a millennial “market mirror” program. The first step is for banks and wealth managers to get to know the millennial generation and their preferences, so they can better align their financial products and services with client expectations. One way to do that is to implement a millennial market “mirror program” internally within your organization. Leverage your millennial-aged employees as beta testers for your products, services and to provide input for your offerings roadmap.

For example, many organizations are discovering that millennials eschew email in favor of real-time collaboration platforms, instant online meeting places and real-time chat. Using this knowledge, banks can invest in collaboration-enhancing technologies for internal productivity and for building online access points to engage and communicate with their millennial clients. This generation of investors may not walk into a bank branch or send an email to speak with a wealth manager, but they do still want to have access to expert, personalized advice, anytime, anywhere, and through any channel they choose, whenever needed. Using a market mirror program, banks can delight millennial clients while also attracting and retaining millennial talent for the workplace.

Offer robo-advisor services. Robo-advisors are essentially software applications that leverage algorithms and advanced analytics about a client’s lifestyle, financial goals and risk tolerance to provide automated investment advice and help clients optimize their investment asset allocations. They represent a new wave of value in the wealth market with a low threshold for minimum investment, low fee structures and the ability to personalize investment offerings to the client’s individual goals and risk tolerance.

As the millennial generation comes of age, the wealth management market will shift to self-service and assisted self-service channels, similar to what is occurring in other areas of retail banking. Robo-advisors and self-service wealth management offerings present an opportunity for a fee scale spanning from “freemium” to full service offerings. Millennial clients may begin with low fee, robo-advisor services but as they acquire more wealth, banks can use these services as an on-ramp to move clients to higher-margin, advisor-led services. By having an established relationship with millennial clients, wealth managers will be better able to keep those clients and move them to higher margin services over time rather than lose them to competitors. Failure to offer a robo-advisor option can result in a lost opportunity to graduate a low margin, self-service client to a high margin, full-service client. It will be difficult to earn primary financial institution status without a robo-advisor offering.

Perhaps the most valuable aspect of robo-advisor services is the analytics they collect and the insights financial institutions can gain from them. The analytics can help a wealth manager understand what clients need now and over time, what content they seek, what questions they have, how frequently they have them, where there are frustrations and what market acceptance looks like for new products and services – all in near real-time. Armed with these insights, financial institutions can make same-day adjustments in service levels, in the design of user interfaces and in the design and pricing of products and services themselves. The collection and analysis of client data provides a treasure trove of information that banks can use to differentiate themselves in the market.

Go mobile. Wealth managers need to focus on developing a “killer” mobile application platform and experience. This is critical for attracting more than just millennial clients; research shows that today’s high wealth and ultra-high wealth clients are also increasingly conducting their business through the mobile channel. In the past, firms spent time and money hiring and training the right people to serve their clients in physical branches. Now, with clients’ increasingly mobile-first preferences, financial institutions need to focus more on hiring the right designers and user experience experts to engineer digital and mobile financial services experiences that rival those in other industries such as retail, entertainment and healthcare. With mobile data traffic forecasted to grow at a compound annual growth rate of 57% through 2019, banks need to plan for an application-centric infrastructure that can scale while optimizing mobile device, application and network performance. 

Video collaboration. Lastly, wealth managers should implement video collaboration technologies that enable advisors to meet with clients remotely. It’s simply not profitable or scalable for banks to have wealth advisors in all branch locations at all times. However, with video collaboration, centrally-located advisors can meet virtually with clients and provide personalized, expert advice anytime, anywhere. It enables wealth managers to scale their business by prospecting and serving clients in remote locations or geographic markets where it may not be cost effective to open a branch location. Early adopters of remote expert solutions have shown promising business outcomes, which include more than doubling products sold per-client and increasing client satisfaction by double digits.

By capturing and delighting millennial clients now, wealth managers can retain them as they increase their wealth, moving them to higher margin products and services over time while earning primary financial institution status.

Mr. Pagano is an advisor, Financial Services Practice, for San Jose, Calif.-based Cisco Systems, Inc. He can be reached at [email protected].