Trillions of dollars are expected to change hands between generations in the next few decades, a fact already widely understood. This has big implications for the technologies the industry uses, and will employ, to handle this tide of money.

Here is an article on the change in the culture, attitude and expectations of investors as wealth is changing hands to more technologically savvy investors. The author is Matt House, technical business analyst at Altus, a firm providing business systems and consulting for financial services. He looks at the opportunity and risks this change presents for businesses; risks and opportunities which are amplified by the rise of electronic transfers, and the fact that regulators are keen to continue lowering barriers to exit. (Altus has clients such as Lloyds Banking Group, Northern Trust, Nutmeg, Old Mutual Wealth, Quilter, Raymond James, SEI and Seven Investment Management.) 

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Over the next 30 years an unprecedented £5.5 trillion ($7.22 trillion) is expected to pass between generations, for the most part, as Baby Boomers bequeath their estates to their younger, more technology-savvy beneficiaries. These new generations of investors come with different sets of expectations. This means that as this wealth changes hands, there will inevitably be a change in the culture, attitude and requirements of investors. Younger consumers are more demanding. They live in an instant world, where they access their news and entertainment online and on demand. They want instant service, at any time and through any channel. And their expectations will be no different when it comes to their financial services providers. 

The UK’s financial services industry, with its traditionally glacial pace of change, will need a real shake up if it is to meet the expectations of a new Gen X & Y clientele. EY’s Global Wealth Management Research Report 2019 showed an accelerating trend where younger clients prefer digital solutions, are keen for alternative pricing models, and are far more likely to switch wealth providers. These new investors prefer simple, personalised and connected solutions over individual products and services.

What does this mean for wealth managers? Personal, face-to-face and traditional fee structures are no longer the preferred method of contact and relationship management. Quicker, cheaper, and more clearly priced “digital” offerings will be the way to win these new clients’ hearts. Clients’ preferences for smart mobile apps are already eclipsing traditional channels, and an accelerating preference for digital and voice-enabled assistants is quickly taking hold.

This presents both enormous opportunity and risk for businesses in the wealth management space; risks and opportunities which are amplified by the rise of electronic transfers, intensified competition and new entrants which present clients with a multitude of options for wealth management providers, and the fact that regulators are keen to continue lowering barriers to exit. These factors are contributing to increasing the pressure on wealth managers to continuously raise the bar for satisfying client demands. And if they don’t move swiftly to accommodate the wants and needs of their changing customer base, it is very likely that these younger investors will simply take the opportunity to move their newly acquired wealth elsewhere.

It is a revolution that we have already started to see in retail banking. The rise of digital challenger banks has been rapid, and heavily driven by younger sections of society. Starling Bank and Monzo are relative newcomers to the world of banking; both were founded less than five years ago. However, in the first quarter of 2019 they came in at fourth and fifth respectively in terms of current account switching performance, clawing away slowly but surely at the old high street banks’ market share. Their product and service improvements haven’t exactly been revolutionary, but they have got the basics right and engaged with their (much younger) customer base in the right way.

When it comes to the world of wealth, change has been slower. Although there are several new fintech kids on the block providing fashionable propositions such as robo-advice and personal finance management tools, there is still a sizable technology gap in basic functionality across the market. Even if you look at the market leading D2C investment firms, their digital solutions generally provide only basic informational views of a client’s account rather than any radical re-imagining of transactional services. Something as simple as setting up a regular investment or a fund switch usually requires logging in via your computer or, worse still, a phone call. 

To seize their share of that £5.5 trillion, wealth managers will need to rapidly catch-up with a decade of digital advances, and re-invent themselves to prove their value to Generations X & Y. 

About the author
Matt House is a technical business analyst at Altus with in-depth knowledge of financial services. Matt has extensive experience of regulatory and transformation programmes across wealth management and banking, and has a keen interest in simple investing, financial education and user experience.