The Art of Courting Wealthy Millennials


by David Chung, Silvio Struebi and Simone Schuttel

OWhen it comes to their private banks, millennials aren’t happy.

In a Simon-Kucher survey of private banking clients born between 1981 and 1996, almost half (46%) said they were unhappy with their current wealth management provider. They are not faithful either. Among their gripes: unattractive product offerings, unattractive investment recommendations, inexplicable fees, clumsy digital processes, and impersonal service.

These findings are alarming. Millennials, who will be more numerous all other age groups in the labor force by 2029 are approaching their peak earning years between ages 35 and 54. These digital natives are also expected to inherit more than $22 trillion by 2042, according to Cerulli Associates. This will be one of the largest intergenerational wealth transfers in history.

Unless the private banks manage to convince millennials that their services are worth the price they charge, they will lose a good majority of their clientele in the years to come.

Quick fixes such as adding cryptocurrency, robo-advice, and ESG benchmark scores are good starting points, but they will have limited success on their own. Rather, the industry needs to recognize that its current approach to customer service needs a fundamental overhaul.

This includes the practice of charging clients a flat fee, typically 1-2% of assets under management. This pricing model assumes that wealth is an indicator of need and does not take into account unique customer situations and preferences. In this model, a Millennial, Baby Boomer, and Gen Xer prospect with $2 million in investable assets is all presented with the same list of product and service options and the same customer experience. .

To meet the needs of an increasingly diverse and complex clientele, wealth management firms must move beyond the old one-size-fits-all model to a modern research-based approach. By using value-differentiated service tiers coupled with transparent pricing, tailored experiences, and advanced self-service, private bankers can more easily defend the value of their offerings and win the hearts of millennials.

Stand out with digital touch capabilities

The current practice in the wealth management industry of offering largely undifferentiated and homogeneous services to all clients is a brake on growth. For the millennium, every private bank seems to promise essentially the same thing.

Against this backdrop of sameness, fintech disruptors flaunting their smart tools and smart dashboards have successfully attracted billions of dollars in investable assets from millennials. According to our survey, up to 80% of private bank millennials said they are considering or currently using fintech services to manage some of their money. These millennials plan to allocate more than half of their investable assets to fintech wealth managers.

Private bankers need to start building differentiated value propositions based on a sophisticated and accurate understanding of the millennial customer. For example, a private bank noticed that younger clients were less likely to respond to product inquiries on traditional offerings such as in-house funds or structured products, preferring instead to receive ready-made trading tactics and investment ideas. highly personalized jobs.

The private bank responded with an investment toolkit accessible through a mobile app or website. The bank used push notifications to send customers timely recommendations backed by sound rationality and research, based on their interests, past behaviors and portfolio positions. Clients also had the ability to extract or browse investment themes, and access research and buy-sell recommendations from within the app.

Another global private bank has identified the features of its advisory proposition that clients value most. The bank discovered a startling fact: younger UHNW cohorts valued self-service digital tools as much as certain non-digital offerings like access to a dedicated investment committee and private equity investment opportunities and closed-end funds. They also want to be involved in the investment process in order to exclude specific risks, sectors or themes from their portfolios. The bank responded with a hybrid experience of digital and non-digital features tailored to the needs of each customer group.

Instead of price versus quality, run both

It’s easy to assume that millennials are price buyers. We think they’re drawn to robo-advisors because of the lower fees, for example. Looking closer, we see that millennials aren’t necessarily looking for the lowest price. On the contrary, they seek quality at an acceptable price.

In our survey, quality consistently ranked as the most important factor above convenience and brand, while price was lowest in millennials’ buying decisions. When the quality is good, millennials are willing to spend money on it.

Private bankers looking to attract millennials must deliver exceptional quality throughout the customer journey, starting with a simple and easy-to-understand value proposition, through the onboarding experience, business interactions, digital tools and pricing.

Simple, engaging and always available

Millennials want a revolutionary private banking experience that will blow them away. Private bankers must be prepared to initiate cultural change and break old ways to achieve it.

For example, a common complaint from millennial clients is finding a banker with the right experience and expertise, with whom there is also a personal fit in terms of common interests, personality and working style. Instead of assigning bankers to millennial customers, a private bank introduced a banker matchmaking tool. Customers swipe left to browse banker profiles right on the app until they find the right match.

Another private bank has introduced subscription or pay-as-you-go tariffs where customers have the flexibility to choose and pay for only the services they want. A well-known private bank has begun evaluating pricing as part of its annual portfolio review, going so far as to offer cost-effective alternatives to align with the changing needs of its millennial clients.

Private banks must begin to master the art of attracting and retaining millennials if they are to remain relevant in the new world of private banking.

David Chung is Partner, Silvio Struebi is Managing Partner and Simone Schuettel is Director of a global consulting firm Simon-Kucher & Associates.


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