As the UK’s wealth managers consider how to re-invent their service propositions following the Retail Distribution Review, they also need to consider new approaches to segmenting their clients.

Research commissioned by Pershing, Brave New World: An investor perspective of wealth management services in a Retail Distribution Review (RDR) world, surveyed 1,000 of the UK’s wealthy population. The research showed that financial attitudes vary most by age group and the younger wealthy generation are showing a distinctly different approach to financial matters compared to older age groups.

Financial services firms have long understood that life stages affect financial needs as much as lifestyle. What has been missed in the past is that financial attitudes also vary between the generations. In fact, age seems to be the most significant determinant of a wealthy investor’s financial attitudes and behaviour.

In demographic terms, those born since 1980 are part of a new generation that is often referred to as Generation Y, or the “Millennial generation”. Still at the start of their careers, this demographic group is only just starting to register on the wealth management radar. The generation that is at the start of its wealth creation journey is very different from the generations that have gone before.

When it comes to the RDR, those under the age of 45 are most welcoming of the changes. While those over the age of 45 are distinctly of the view that the removal of commissions from investments is the most significant outcome of the reforms, those under 45 place more emphasis on professional qualifications,  transparency on fees for advice, products and services and clarity about the range of products and services provided. Forty-five per cent of under-45s find it easier to understand the fees they pay for financial advice, products and services.

The younger generation can see the wider positive impact of the changes brought about by RDR for their own personal circumstances. Nearly a third (30 per cent) felt financial advice firms were keener to have them as a client while 35 per cent felt access to good financial advice had improved.

This is perhaps not surprising as younger investors will have had less experience of the previous regime. They will therefore feel the weight of the reforms differently. For example, their experience of the impact of commissions on portfolio performance and adviser recommendations will be less extensive than the older generations, and so their sentiment on this issue is likely to be less negative.

This is not to say that investors under 45 are inexperienced when it comes to financial services. Among the respondents those in this younger group were most likely to characterise their knowledge of investments and RDR to be very good. They are also more likely to have a financial advisory relationship than the older groups, either to discuss financial decisions or to delegate decision making.

The under-45s are actively embracing the changes. They are significantly more likely to have made changes to their investment portfolio than the older generations. Forty per cent have either extended or consolidated the range of products in their portfolio. More than that, one in three of the under-45-year-olds has considered changing provider as a result of the RDR compared to one in six in the other groups.

The younger generation also place value on good technology. However, this is not at the expense of a personal relationship. Investors under 45 want a high level of personal service, but delivered from an organisation with systems that support the advisors who deliver that service.

A wealth manager’s technology should support the relationship: facilitating information flow, providing better access to products and services, improving information about markets and enhanced record keeping. It should augment and cement the relationship, not replace it.

For many financial providers technology has long been a “back-office” function.  If the demands of the upcoming generation are to be met, then technology will need to be front of mind for wealth managers and visible in the front office.

These indicators suggest that wealth managers in the UK should consider how to appeal to this dynamic up-and-coming group as they are particularly likely to be considering their choices under the new regime.