Connecting With Younger HNW Clients - What Are Private Banks Doing?

Tom Burroughes Group Editor London 9 November 2021

Connecting With Younger HNW Clients - What Are Private Banks Doing?

We take a look at what a large European bank is doing to attract younger clients, as well as what some other players are up to in this field.

Banks and wealth managers have known for years that they need to pivot towards younger affluent and high net worth adults. In the US, for example, a report in 2019 by Morgan Stanley showed that Millennials are the largest driver of net new loan demand and will continue to do so for almost a decade.

And, as the industry knows, younger adults are on the whole keener on digital technology, and they are less trustful of established business models and traditional ways of doing finance than their older peers. Certain things aren’t going to change – there’s no logical reason why the eternal verities of trust, honesty and meticulous attention to detail don’t apply to everyone. 

"Encouraging people to get started with proper, professional wealth management earlier is a drum we've been banging for some time,” Lee Goggin, co-founder of online matching service, said. “The simple power of compound returns, not to mention tax mitigation, mean that the earlier clients start the better.”

“The 30-plus UK wealth managers we have on our panel are also noticeably trying to woo younger clients too. We're seeing special workshops, content and even whole teams dedicated to younger clients, and particularly entrepreneurs. Serving 'smaller' clients profitably is of course tricky, but it seems many firms are seeing this as an investment in clients with huge potential; of course, some of these younger clients are HNW by any measure already,” Goggin said. 

The harsh realities of demographics are in play. As elderly clients die, newer and younger clients need to be onboarded for a firm to even stand still, let alone raise its share of wallet and for the sector to grow. 

Deutsche Bank, Germany’s largest lender and a major international wealth player, is directing significant resources to the younger client market, Claudio de Sanctis, head of the international private bank, CEO Deutsche Bank EMEA, told this news service recently. He spoke at the London Art Frieze exhibition in Regent’s Park, which the bank sponsors. (Some of his more general comments on the bank's strategy can be viewed in this article from yesterday.)

“To capture that next gen, we need to develop a digital proposition that is [planned] around their needs,” de Sanctis said. “We are focusing specifically on the affluent segment and we are developing this [proposition] over the next 18 months.” 

Deutsche Bank will develop a focused digital channel, but also with strong elements of in-person contact, he said.

There are other signs that banks are waking up to generational shifts. This week, for example, Coutts, the venerable UK bank, launched its first advertising campaign in 50 years to attract the next generation of wealth creators. Called “Reflecting,” Coutts said the campaign's goal is to reach a new set of wealth creators, including digital entrepreneurs, influencers, Esports players, and musicians in order to push home a redolent message of “achievement by acting in the right way."’s Goggins says the digital switch by banks towards the younger cohort is only really beginning to hit the wealth management shore. 

"Outreach to the next gen inheritors has been strong for a number of years, yet it is only now that the digitisation of wealth management has really taken off that I see the sector becoming really appealing to younger investors. Tech investments are really paying off for those firms which have got cutting-edge capabilities," he said. 

In Singapore - a jurisdiction that likes to stress its cutting-edge banking industry with younger adults in mind - its largest domestic bank, DBS, announced a 14 per cent rise in spending on digital technology for 2022. 

The idea of there being a large cohort of young HNW individuals with money that needs managing needs to be put in context. In 2019, Credit Suisse wrote in its annual survey of wealth trends that Millennials, for example, had a wait for inheriting from their Boomer parents. In the UK, the average age at which Millennials expect to inherit is 61. Other international evidence suggests that about half of those who will inherit have done so by age 50, that report said.

Banks must also be mindful of how younger HNW individuals have been through particularly testing times, as the Credit Suisse study noted: “They suffered from poor job opportunities resulting from the financial crisis, global recession and slow recovery, but have also faced special problems on the wealth front. They have wisely invested more in education, but have had to do so while paying higher tuition fees than in the past, thus accumulating substantial student debt. And high house prices in many countries have thwarted aspirations for home ownership, which was a core feature of wealth accumulation by previous cohorts.”

Growth drivers
Deutsche Bank’s de Sanctis talked more broadly about what he sees as growth drivers at the bank. 

“We expect the growth outlook for the IPB [international private bank] to largely stem from the bank for entrepreneurs and the ultra-high net worth business across every metric. For the affluent segment, we expect this to grow after we have developed the platform. We may see in three to five years that the growth from this segment could match our other two strategic pillars,” he said. (The “bank for entrepreneurs” refers to the integration of wealth management coverage and commercial bankers to cater to family-owned large Italian and Spanish companies and SMEs. The integration aims to provide holistic banking services at every stage of an entrepreneurial client’s life and business cycle, from business needs such as lending and corporate finance to advising on their private wealth management needs.)

As far as the broad mass-affluent category of clients - not only younger adults - Deutsche’s international private bank is “focused on the shift from a broad retail offering in Italy and Spain to a more focused offering for affluent clients,” de Sanctis said. “Spain is leading the charge, ahead of Italy, which will see the creation of enhanced digital services and a number of flagship branches in strategic locations, more tailored to the needs of the affluent client segment.” He declined to comment on the shape of a specific fee structure.

De Sanctis was asked how many conversations he has with clients about the risk, not just of threats such as inflation and trade disruptions, but also the danger of missing out on stronger markets, new sectors, and of people being too easily dominated by one mind-set.

“Almost every conversation we have with a client will involve an holistic discussion about both the opportunities and risks we see in the market at that time. So, in answer to your question, a lot!” he said. 

“We know that changes in the economic environment often open up new perspectives, which might allow clients to take stock of previous habits or biases and therefore create room for change. As your question points out, today’s prudent risk manager must consider how to avoid missing opportunities as well as ways to reduce risks. Our relationship managers and their portfolio management teams are well versed in helping clients find ways to take advantage of these opportunities - even if they may be at the riskier end of the spectrum - by using hedging instruments as well as a traditionally diversified global asset allocation for example,” he said. 

“A lot of clients are concerned about what the world will be like, not just because of COVID-19 but because we have had 10 years or so of zero interest rates. There is a clear consensus that this situation isn’t sustainable,” de Sanctis added. 

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