New ethos needed to match millennials’ entrepreneurial spirit

Understanding the evolving profile of global entrepreneurs is crucial for private banks to be able to grab a bigger share of wallet from this client segment, which has gained such a strategic importance for revenue growth.

In particular, identifying the business and wealth requirements of millennial entrepreneurs (those aged under 35) is vital to any private bank’s success, according to a recent HSBC study - which have surveyed 2834 entrepreneurs with average wealth of $4.6m.

“The new generation of millennial entrepreneurs are revolutionising the nature of entrepreneurship,” says Nick Levitt, head of Global Solutions Group at HSBC Private Bank. “They are starting in business younger than previous generations and are involved in a greater number of enterprises.” 

Today’s young entrepreneur is much more likely to be a “serial entrepreneur”, with the wealth they create recycled back into new businesses, rather than classic wealth management, he says.

These entrepreneurs are building bigger businesses and creating more jobs. They are as motivated to create an impact on the world as they are to make money and have a positive impact on their communities.

Also, for the first time, there is near gender equality in the next generation of millennial entrepreneurs, with women across the world launching and operating new enterprises at a faster pace.

 “The wealth management industry will need to shift its mindset to a more entrepreneurial one, and adapt to serve the corporate as well as personal needs of business-owning clients,” he says.

To meet these requirements, around two years ago HSBC set up a Global Solutions Group aimed at offering to entrepreneurs “a unique proposition” across both the private and corporate bank, by delivering ideas of focus and interest to them. These include access to capital markets, mergers and acquisitions, real estate, lending, direct investments, global markets and transactional banking.

“What is critical about working with entrepreneurs is to engage them first, by giving them what they are interested in, what they are worried about at the moment and what they are looking for,” says Mr Levitt. “And then the money will come [to the bank].” 

With about 2m business owners worldwide as clients of the corporate bank, HSBC Private Bank’s core engine for growth was based on “cross-fertilisation”. Last year, more than half of the private bank’s net new money came from existing clients, predominantly from the corporate bank, as well as the retail arm. 

Entrepreneurs have some distinctive, common characteristics, which private bankers need to be fully aware of. “Entrepreneurs generally like straight-talking and hate being cut out of the decision making,” says David Durlacher, CEO of Julius Baer International Limited in London. 

“The old boys’ networks of a generation or two ago where ‘bank knows best’ are over,” he says. Entrepreneurs have become wise to the conflicts of interest that can exist in universal and vertically-integrated banks, and of their tendency to push clients into models which easily become pigeonholes, warns Mr Durlacher.

“To succeed, wealth managers must demonstrate independence of mindset, transparency in communication and ability to tailor financial plans to the client, not the bank.”

Training private bankers becomes critical. Required skillsets include “learning to ask the right questions to get to the heart of what the client is wanting to achieve, marshalling the resources of the global firm to get a plan quickly together that meets those needs, being prepared to challenge the client to look at their situation clearly and perhaps through a different lens”, he explains. 

Finally, talking sense rather than jargon, and being honest from the outset about what can be delivered are key. “Clients don’t want a sales pitch, they want someone to come alongside and level with them,” adds Mr Durlacher.  

Stats: The future face of entrepreneurship

Business turnover of millennial entrepreneurs (aged under 35) is more than five times larger than that run by their peers aged 55 or more

On average, millennials’ main business interests employ more than twice as many staff as those of their counterparts aged over 35 (123 vs 58). 

Millennials typically have active shareholdings in five businesses, compared to just three for those aged over 35

Nearly half (47 per cent) of all millennial entrepreneurs are female, compared to 26 per cent of over 55s

Two-thirds (67 per cent) of millennial entrepreneurs come from a business-owning family

The highest proportions of millennial entrepreneurs are in the Middle East (63%), mainland China (44%), and Hong Kong (44%)

Source: HSBC