The ‘Great Wealth Transfer’ is front of minds for wealth managers. How should they adapt their business model to appeal to this emerging cohort and avoid losing the newly inherited? It’s a serious issue warranting attention. The Capgemini World Wealth Report 2022 estimates that Baby Boomers, born between 1944 and 1964, will transfer around US$30 trillion in the US alone in personal wealth to the next generation, and that up to 80% of those that inherit will at least consider changing their wealth manager.
Crucial to successfully capturing and keeping the ‘next-gen’, is meeting their needs to prevent them leaving. This includes understanding who they are, where they are in life, and what their expectations around service provision and delivery are.
Indeed, unlike those that are passing wealth down, those set to inherit wealth are likely to still be in the wealth accumulation phase, meaning their investment needs go beyond just avoiding wealth losses. As active investors, they want an engaged relationship with their bank or financial services provider. Their life context is highly relevant for receiving the appropriate service. Rather than offering a static service proposition, the wealth manager thus needs to be able to take into account the client’s current life situation and offer services that evolve as his or her life progresses.
radicant, a nascent bank backed by Basel-Country Cantonal Bank BLKB, and one of our trusted partners, is envisioning to capture the imagination of this cohort. With a sustainable, digital-first proposition, the bank hopes to inspire and catch this segment in its wealth accumulation stage and grow with them throughout their wealth journey.
Extending the concept of banking, radicant wants to become a real life companion – planning, executing and monitoring financial activities while aligning financial decisions with a sustainable lifestyle. The proposition is digital-first and leverages technology to reduce costs and democratise wealth management, bringing it to the newly wealthy and mass affluent.
Indeed, although Switzerland is revered for its banking, Revolut is its number one digital bank. Why? Because the experience is both pleasing and convenient, which fosters loyalty.
Humans, however, remain extremely important in wealth management, so ideally, the proposition should play to the strengths and qualities of each. Digital-first does not mean digital only.
Following this approach, radicant hopes not just to capture interest in the short term but trust in the long term. Other wealth managers could learn from this. The technology angle of whether a proposition fits in with someone’s digital habits and the way they live their life is not the home turf of traditional wealth managers. Those need to look around, see where their audience is, and go meet them there.
Sustainability
Younger generations prefer and appreciate a sustainable and values-based investing approach. Besides the digital-first approach, the other key component of radicant’s strategy is to embrace sustainability in every aspect of its business. The bank has fully aligned itself with the 17 UN Sustainable Development Goals (SDGs) – meaning that it not only aligns the investment activities but all its services and the way it conducts business with the sustainability requirements.
In fact, radicant’s goal is not just to sell a series of sustainable products, but to build a collaborative community and gain trust through transparency. For example, radicant holds a proprietary sustainability rating based on the SDGs for each and every company in a managed portfolio. Those metrics are available in real-time via an app, putting into effect the digital-first approach.
Having a fresh cloud-based tech stack, taking an ecosystem approach and being open to collaborate with other vendors and partners is key for banks like radicant. While this allows for a cutting-edge digital presence which meets the needs of younger, more tech-savvy investors, it also enables efficient data collection and analysis.
Further, modularity of wealth management solutions is advantageous, as it allows solutions to be expanded simply, quickly, and cheaply and enables services to grow with the needs of customers. APIs there while provide the flexibility to connect and extend the solutions with third-party services. Such modularity and flexibility can save wealth managers costs and time-to-market, ultimately also with a positive impact on client satisfaction and retention.
Overall, if banks are to thrive in the ‘Great wealth transfer’, they need to focus on aligning their banking services with the lives of their customers. For the next-gen, that means offering both digital and sustainable services. Having the right tech tools to deliver on that will be crucial.
