What young wealthy people expect from their bank

Even a perusal of the daily and trade press makes decision-makers in retail banking frown with concern: While eroding interest margins, bargain hunting by some customers, reluctance to buy securities, and aggressive digital financial services (fintechs) are gnawing away at revenues, costs are rising due to investments in multi-channel offerings, regulatory requirements, and higher wages.

Some retail bankers may look enviously at their colleagues in wealth management (WM) or private banking. There, it looks as if all is still right with the world. Instead of interest rate hoppers with a preference for costly digital interaction channels, the dominant clientele is not very interested in price and is happy to engage with advisors and mandates. The future also seems rosy: the company is relying on tried-and-tested methods such as the personal contact person, optimizing service ratios through the use of modern CRM systems, striving for good value development, and investing only the bare essentials in technical equipment. After all, the company’s main selling point is its good relationship with its customers.

As consultants with many years of experience in the financial industry, we have never been convinced by this simplified but essentially accurate self-image of private bankers. That is why we are traveling into the future of wealth management with this study. To do this, we asked thirty wealthy investors under the age of thirty, each in exploratory one-on-one interviews, about their expectations of their wealth manager.

The results suggest that private banking is facing just as far-reaching changes as the mass market business. Nevertheless, the majority of asset managers seem to have come to terms with the modernization backlog in their profession. Even if one or the other industry leader is expanding its sales channels, networking and offering online services, most of the players seem to hope that new customers will drop their desire for e-banking and channel integration at the threshold of wealth management (or only demand such things in giro transactions) and will henceforth only listen to the advisor assigned to them.

Our study shows, however: Some younger wealthy people never really get into wealth management. Relationships with WM providers exist in most wealthy families, but often the younger generation lacks a motive to use them. Lacking a model of care for the wealthy of tomorrow, providers are unable to access them, losing ground to the omnipresent retail banks and expanding fintechs. This is critical not least because young investors have financial resources that make them interesting as customers at a young age.

If a young investor nevertheless contacts a wealth manager, his expectations are often disappointed. Yet the target group does not want futuristic hoo-ha, but only the consistent further development of classic World Cup virtues. Young wealthy people want to be looked after just as personally as the generations before them. Only via channels such as e-mail and websites. In addition, the successors to the wealthy, who have grown up with the Internet, expect constant accessibility and tailored offers.

According to the participants in our survey, wealth managers rarely succeed in meeting these demands. Consequently, just under half of our panel say they will look for another wealth manager after any further inflows of assets.

From the provider’s point of view, this raises the question of how the personal advice that is still essential in wealth management can be provided on digital channels. Those who are among the first to present convincing solutions will gain a sustainable competitive advantage. The answers can diverge, for example, with the market position of the company. If online functions are standard for large WM providers in the future, smaller companies will achieve a lot in the first attempt if they can be reached by phone for longer and communicate more by e-mail. Even though our study documents the views of young wealthy people, such measures are likely to bear fruit with all customer groups.

To maximize success with younger clients, wealth managers should develop a separate service model for them. Approaches oriented toward generational change fall short with their focus on inheritance. In practice, it is more a matter of recognizing representatives of the target group – also in the customer base -, addressing them with exclusive offers such as the so-called concierge services, and keeping the dialog going via the channels of their choice.

Find out more in our study 30 unter 30 – Was junge Vermögende von ihrer Bank erwarten (engl.: 30 under 30 – What young wealthy people expect from their bank).