Catering to the Next Generation of clients

If we look at the factors which are transforming the whole private banking business model and the client experience, such as regulation, technology and the demographic shift to the next generation of clients, which is the most important?

Iqbal Khan I do feel the next generation disruption is one of the largest shifts within the wealth management industry. This is very dear to my heart. I see myself as a representative of the next generation when it comes to private banking and wealth management. 

This is probably demographically one of the biggest populations globally. Their needs and where they are in their lives are very relevant to a private banker. If you think about sustainability, this is the next generation of our clients, of our industry. It is very different to some of the other generations.

This next generation is digitally savvy. They’re growing up in a transparent environment, in a world of information. They’re used to comparing. They’re used to services anywhere, anytime at the touch of a button. It is a very different consumer base.

One of the elements that is always very striking spending time with them is they think about investment in return, risk but also having social impact. That dimension is very relevant and will have a lasting impact on how we serve this client base. This is unique to this generation.

If the previous generation had their own relationship with a bank, does the new generation think, “Well, we want a new relationship with a different bank.” How do you keep the clients coming to your bank?

Iqbal Khan One of the things is planning ahead and having that dialogue. The Young Investors Organisation is building a community and connecting them on a different level than just financial advice. They share values, they’re thinking about purpose, about their next stages in life, their studies, but also how they’re going to make an impact in the business world.

There will be changes as they come, but for us, as an institution we need to be prepared for that generational shift. Also, the relationship manager or the client adviser who is covering the older generation is not in every instance the right individual to cover the next generation. I don’t think the relationship manager of the next generation has to be a digital native, but I do think they need to understand and feel what the next generation is looking for, and spend time with them.

One of the reasons I spend a lot of time with the Young Investors Organisation is because I want to understand how they tick, what is relevant to them, what they are looking for. And it is more than just financial advice. It is that element of purpose. 

There is also this fear of failure in this generation. There is this fear of, “Will I be able to live up to expectations? What do I do with this responsibility? The initial generations built up all this business. We have employees. Now I will be responsible. What does that mean?”

Going through that process with this individual, and I’ve done that myself with some of them, is extremely important and that builds a relationship.

Every bank has its communities of young investors with its boot camps where they train them in investment ideas and asset management. Are these just marketing tools for many banks or can these communities really transform the way private banking is conducted?

Iqbal Khan Looking at the YIO I do feel it is transformational. We’ve been a sponsor of the Young Investors Organisation and have been involved since its foundation 10 years ago. In these 10 years, we’ve spent a lot of time with the next generation, which means listening to them and understanding their needs, their values and adjusting our services and offerings.

The next generation has different aspects of how they think about banks, wealth managers but also how they want to interact with the financial industry. 

Communities will definitely have an impact on the future or private banking. We are here to provide a service, which is to preserve and sustain wealth over a long time across generations. This is an extremely important element because I do feel that the generational shift is at an inflection point. The millennials are one of the largest demographic groups of young individuals, with very specific needs but it’s also a challenging community. If we do not embrace that as an industry, as financial advisers, we’re going to miss out on that generational shift completely.

One of the Supertrends Credit Suisse identifies is the rise of millennials and their values. How does this help shape investment strategy?

Nannette Hechler-Fayd’herbe The Supertrends are all about our thematic, high convictions. They are a complement to what we do when we construct a portfolio with different asset classes. They serve as a guide in terms of what’s happening in the broader world and how this can relate to concrete investments.

Millennials are one of the largest generations since the baby boomers. They are influencing consumer trends. They are going to influence investment trends and the broader investment community is very interested in that.

Millennials have affinities like the digital affinity, which does have an implication on the demand for specific sectors. Technology is at the forefront, even from an investor standpoint. They are very interested in infrastructure and impact investing. One of the things we have looked at during this time in Rome is how they can participate, for example, in making an impact on affordable housing, one of the largest missing infrastructures these days.

What makes this generation any different to the angry young men of the 1960s or the Cool Britannia youth movement of the 1990s, bearing in mind we’ve entered an era of populism and increased nationalism?

Nannette Hechler-Fayd’herbe There are some particularities about this generation. One is that, beyond being globally connected, this is very much the post-modern generation. They are marked by the instability that followed the financial crisis. They experienced the uncertainty, difficulty and access to jobs, for example, in many developed markets. This generation that has fears as well. They are very much concerned about the environment, about sustainability in general. Although there are several trend-reverting cycles, this is a generation with its own marks.

We’re talking about technology and the networking possibilities of the Young Investors Organisation, but isn’t there a danger that the relationship manager could somehow be sidelined? That he or she no longer has that cherished access to their clients which they had previously?

Francesco de Ferrari If we look at the intrinsic role of the RM, it is really to understand the client needs and then to be able to bring them the most appropriate products or solutions. In the past, maybe this was more of a one-dimensional product or solution. Today, and for the past few years, for RMs to be relevant to the client, they need to be able to play that network orchestrator role and bring investment banking, asset management and trust expertise to the clients, and even help them connect to each other to find solutions. So the RM still plays a critical role, even with millennials, who are high tech but are also extremely high touch.

If we use a sports analogy, in the past the RM represented the whole team. Today he has to be the quarterback, who makes sure that all the team members are playing for the benefit of the client in a coordinated approach.

But are banks prepared to shift their business model to work with this influential group or are they just watching the other innovators and thinking, “Well, we might see if they falter and we’ll just carry on doing the same thing we’ve always been doing”?

Francesco de Ferrari There could be an inherent complacency in saying, “Well, this is just another of these generational transitions. We’ve managed the ones before, we’re going to be successful on this one as well.” But this generation is significant in size and is profoundly significant in its characteristics.

At the YIO in Rome, Steve Wozniak, one of the co-founders of Apple, reminded us that Google and Yahoo were created only 20 years ago, while the iPhone and Facebook only came around 10 years ago. These profoundly changed the way this generation interacts with banks. Banks will need to start adapting.

Credit Suisse was founded by Alfred Escher who was an entrepreneur and innovator, and we’ve retained that DNA. We are taking a lot of initiatives which are really focused on listening and better understanding this next generation.