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How Financial Advisers Can Appeal to NextGens

I thought I would share an article I co-authored with April Rudin and the CFA Institute. Originally published at https://blogs.cfainstitute.org/investor/2016/04/11/how-financial-advisers-can-appeal-to-nextgens/

Many thanks to April and the team at CFA Institute for the opportunity.



Financial advisers who fail to understand and act on the behaviors and demands of young high-net-worth individuals (HNWIs) may be unprepared for the long-term shifts in client attitudes that are on the horizon. These are among the findings of Capgemini’s 2015 US Wealth Report, the consulting, technology, and outsourcing services firm’s second annual examination of United States–specific wealth trends.

To help financial advisers prepare themselves for this shift, Enterprising Investor interviewed David Wilson, head of the strategic analysis group at Capgemini Financial Services and founder of thewealthconsultant.com, for his personal views on what advisers can do to appeal to NextGens.

April J. Rudin: One of the report’s more unfortunate findings is that US HNWIs under the age of 40 have relatively low levels of trust, confidence, and satisfaction in wealth managers. What are some possible reasons for this discontent with the wealth management industry?

David Wilson: I think it is important to note that, while lower than the older set, the results were not terrible, so there is nonetheless a foundation of trust for advisers to build on.

However, the primary reason is that under-40 HNWIs are less likely to believe that wealth managers understand their needs, which isn’t surprising given that most advisers are far older, at least in markets like the United States.

What is certainly true is that younger HNWIs are ready to vote with their feet and leave firms that provide below-par service. This is only going to continue as younger HNWIs gain in number and influence through creating new wealth and inheriting their parents’ wealth. This below-par satisfaction and propensity to leave manifests itself in other ways, too. For example, younger HNWIs have far more relationships with wealth firms, meaning that each firm only gets a relatively small part of the overall portfolio.

Is this attitude among young HNWIs something that is occurring predominantly in the United States, or is it more widespread?

This attitude among young HNWIs is widespread across the globe. Whether it is young entrepreneurs in the United States or Asia-Pacific or baby boomers passing on wealth, managers must focus more on younger HNWIs than they have been doing in the past.

What can financial advisers do to build trust and confidence when working with young HNWIs?

There are many areas to focus on, and many will be specific to the relationship and the unique needs of the individual client.

That being said, fundamentally, advisers have to overcome the myth that younger HNWIs only have simple wealth management needs and are only interested in utilizing online services to fulfill them. In reality, the financial planning needs and concerns of younger HNWIs are acute, running much deeper than those of older HNWIs, resulting in high demand for professional advice. At a global level, for example, they are more worried than wealth managers realize about affording retirement, managing education costs, and passing down their wealth, just to name a few examples. Therefore, advisers must build solutions that encompass not just digital enablement (which is indeed in high demand among this group) but also deep-planning capabilities.

Going forward into 2016, if a financial adviser only has the professional bandwidth to make one strategic step forward, what should he or she prioritize?

Find a way to engage across the client household! It may be out of your comfort zone (and sometimes very sensitive to pull off) but is critical to serving the household’s needs most effectively (and in retaining those assets during wealth transfer).

Do I have to stop at one?! I would also like to say that deploying digital tools for prospecting and engaging with clients can no longer be ignored. If your firm has a compliance layer to support this, go for it. If not, lobby them to put it in place so you do not lose ground to your competitors.

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