Banks must evolve to connect with the clients of tomorrow

With the largest wealth transfer in history looming, private bankers have a crucial role to play in engaging the next generation, as emerged from leaders’ discussions at the recent FT wealth management summit.

“Catering to the needs of the next generation is very important for all wealth management players, as it is important for the bank’s sustainability and growth. We need to train bankers so they are able to talk to the next generation in the same language and understand their needs,” said Amy Lo, co-head wealth management for Asia-Pacific at UBS. Service speed, convenience and personalisation through digitalisation are paramount to stay relevant. But it is also important to create different touch points to engage with younger clients on topics they are interested in, she added. 

Younger clients see themselves as “stewards of wealth, purpose and impact”, said Beth Lawlor, president, private wealth management at US Bank.

Advisers need to understand the younger client world through their lens, their attitude to risk and their focus on generating impact. Unlike the “myopic focus on legacy within the family” of former generations, younger cohorts have “a strong desire to make a difference in the world and contribute to the ‘greater good’”. This leads them to have a higher risk tolerance, if they believe they are investing for the right purpose.

Trusted advisers such as private bankers must engage younger clients and guide them through this “increasingly treacherous journey” of having to take more risks, believes James Chen, founder of Clearly, a global campaign to enable access to glasses for everyone in the world.

In the same way private bankers help clients take “smart risk” in their financial investments as the traditional 60/40 balanced portfolio no longer works today, they need to learn to be good stewards and help clients build the “right mindset on risk taking” in the philanthropy world too, where there is a “real dearth” of risk-taking capital. 

“As high net worth individuals or families, we are the only ones who can take those risks to fund projects, which can fail. But if they succeed, they can be game changers,” said Mr Chen.

Private bankers also play an essential part in bringing the family together at delicate stages of wealth transfer, when lack of communication and dialogue between generations often leads to failure. 

They need to engage the young early on, facilitating uncomfortable but meaningful conversations between generations, to reverse the trend of the next generation removing their parents’ advisers after inheriting money.

This is especially important as “clients want their legacy to be more than just simply a bank balance”, said David Durlacher, CEO of Julius Baer International, at the summit. “They want to pass on their values, leaderships, skills, and the wisdom they have built up during their lives to the next generation.”

Employing a more diverse workforce becomes even more important going forward, if wealth managers want to capture the millennial generation.

With the huge rise of wealth created by women, and with much of new clientele coming from fast growing businesses in developing countries, private banks are realising that, not only it is more ethical but it makes more economic sense to employ more people who are diverse by gender, race and social backgrounds, matching those of their growing client group. 

Young entrepreneurs and start-up founders want to do business with individuals they can relate to. They are just not comfortable giving their wealth to the “typical middle aged, Caucasian male”, said Ms Lawlor. 

“We’re making progress but we’re not nearly where we need to be. But the more our industry can employ, promote, and really embrace diversity, the more we’re all going to win.”