Next-gen segment wealth trends
Numerous demographic shifts currently under way across the wealth spectrum will alter the complexion of wealth management over the next decade.
The last of the baby boomer generation, who hold the bulk of global wealth, are reaching retirement age, and the transfer of wealth from this generation to their children has begun.
“Dealing with a rapidly ageing population is creating a huge shift for the international financial institutions in the developed world. Life expectancy is growing and, therefore, client funds need to pay for their lifestyle and medical costs much longer,” explains Viviana Van Agtmaal, Chief Representative Officer at Banque SYZ SA.
However, many wealth managers traditionally focus on offering wealth accumulation advice rather than income planning. Wealth managers will need to blend their advisory models to cater to both client objectives.
“These requirements will also directly impact the wealth inherited by the next generation. Leaving an inheritance, which used to be one of the top three investments aims of clients, has become an almost impossible task,” continues Van Agtmaal.
The younger generations will likely receive smaller inheritances in general unless wealth managers can adapt to market conditions, she says.
“Diversification and protection against downfalls on portfolios will become key factors to maximise returns on investment.”
Similarly, wealth managers and advisors are ageing rapidly.
As such, the industry must prepare for a significant workforce transition.
“Wealth managers will need to appeal to a much younger generation than they used to,” says Van Agtmaal.
The wealth management industry will need to recruit sufficient advisors to maintain current service levels and train them appropriately to’respond to the next generation s investment and engagement preferences.
According to the Boston Consulting Group’s (BCG) 21st annual Global Wealth Report, the next-gen segment, composed of individuals between 20 and 50 years, will emerge as an influential driver of future growth over the next 10 to 15 years. Importantly, the next generation doesn’t want to be treated like their parents, based on survey feedback. Yet many wealth managers are not attuned to these generational differences.
Wealth managers will need to refresh their business models and approaches and explore new product and digital frontiers to deliver the calibre of service that meets the needs of the emerging generation of high- and ultra-high net worth individuals.
“Those willing to stretch their models will be strongly positioned to capture the next wave of growth, which is likely to be very large,” says the report.
In this regard, the BCG report says the next generation collectively has longer investment horizons, a greater appetite for risk and, often, a desire to use their wealth to create positive social impact as well as solid returns.