Over the next few decades, approximately $30 trillion in wealth will be should be forwarded from baby boomers to millennials. A survey of Capgemini Research Institute have found that they will be more demanding clients for wealth management firms than their parents and grandparents.
Earlier this year, the French consultancy looked at nearly 3,000 high net worth individuals (HNWIs), defined as people with investable assets of $1 million or more. He found that millennials getting rich are much more price sensitive than the previous generation, especially in a bear market. The majority of them switch advisors to find a better solution than what might have worked for older investors.
“We tend to think that the rich are not fee-sensitive, but of course they are because they pay a lot of fees,” said Elias Ghanem, head of Capgemini Research. “Many fees were covered by the huge performance in the past, but as performance declines, the fees will be more and more visible.”
The millennium »freemium mindsetwhich has developed over the past 10 years is another factor. Young HNWIs are less willing to pay for simple access, as they expect it to be free in exchange for data or deposits.
About half of millennials surveyed said they had changed their primary wealth management firm in the past year, with high fees and a lack of digital expertise being among the top reasons. Over 70% of high net worth individuals have invested in digital assets, and for those under 40, that number has risen to 91%.
Capgemini has observed that millennials prefer a hybrid model for advisory and information services. The pandemic has caused HNWIs to reduce their reliance on wealth managers and become more actively involved in investing, which has driven demand for self-driving tools.
“HNWIs always value the human connection and may be willing to pay for it,” said Ketan Samani, chief digital officer at China Development Financial, but observed that there is a “dichotomy between full digitization and personal counseling. from the point of view of products, services and distribution.
In two generations, women will hold 70% of the world’s wealth
Asset management firms must also anticipate another big change in the investor pool: the growing importance of women. According to Royal Bank of Canada.
As women move up the workforce, much of the wealth of men who die will end up in the control of wives who tend to be both younger and longer-lived, according to analysis by consulting firm McKinsey. “In the United States, women outlive men by an average of five years, and heterosexual women marry partners about two years older,” the firm wrote.
“That doesn’t mean women will be rich and men will be poor,” Capgemini’s Ghanem said. “But women are working more, they are highly educated, more engaged, more visible and more vocal, whereas women used to be behind the scenes. What was there, but not mentioned, becomes quantified. It is the positive consequence of many years spent pushing women to be at the front.
Despite being able to acquire a much larger share of the world’s wealth, women tend to be less confident than men in their financial decisions, and wealth management companies need to adjust their approach if they want to. retain their customers, according to the Capgemini report.
“Women are more sensitive to advice, to education. Women don’t respond to hard selling,” Ghanem said.