The writers of this article are Dr Silvio Struebi, partner, Global Banking Practice, Hong Kong and Singapore Office; Maximilian Biesenbach, partner, Global Banking practice, Cologne and Desi Soetanto, consultant.

The editors are grateful to be able to share these insights and invite readers to respond. We do not necessarily agree with all the views of guest contributors. Email tom.burroughes@wealthbriefing.com and jackie.bennion@clearviewpublishing.com

Recent research by Simon-Kucher & Partners revealed that more than half (56%) of high net worth UK Millennials are dissatisfied with their current wealth management provider. The results of the study underline the global trend, where dissatisfaction rates are at 60 per cent.
 
Unhappy with traditional wealth managers, 80 per cent of Millennials surveyed are currently using or are planning to use online technology, such as fintechs, to manage their wealth. With more than half of the respondent’s wealth already managed digitally, wealth managers worldwide risk losing trusted client relationships because they have overlooked the needs of their clients’ younger relatives. 

Simon-Kucher’s research shows that a great deal of dissatisfaction stems primarily from poor customer experience. Lack of transparency, unappealing offerings, and client-RM mismatch due to the generational divide result in a disjointed customer journey, especially to digital natives who are used to accessing services at the click of a button.

Fintechs on the other hand, approach wealth management in a different way. They exist to solve the frustrations that Mllennials face with their current providers. Their interfaces were built to attract the younger generation through association with admired brands and adoption of gamification techniques. 

Additionally, new entrants have been able to more successfully differentiate their proposition to appeal to relevant segments of the market in a more targeted fashion to win market share from more traditional players. 

This doesn’t mean the extinction of traditional wealth managers, however. The transfer of wealth is just starting, and by acting fast to satisfy Millennials, wealth managers can build successful long-term relationships with this new and lucrative client base. Over the next three decades, Millennials could have inherited 30 trillion US dollars, and by next year they will make up 50 per cent of the total global workforce. 

To thrive in this industry, there are three key areas banks need to address: 

Highlighting the true value of relationship managers: Digital tools cannot replace the human touch 
Wealth managers and their fintech competitors are selling the same product – goals-based wealth planning, tax advice, mortgage requirements, as well as long-term planning for retirement and inheritances. 

While fintechs are adept at positioning themselves as offering a service, the value-add for wealth managers comes from building a tailored, personal, and one-to-one relationship with their client and solving complex financial needs that digital tools cannot.  

Giving customers the option to access exclusive services or directing them towards tailored portfolios that give them the opportunity to act on their social conscience such as sustainable investments adds an additional layer of tailoring that millennial clients find enticing. 

This client segment is willing to pay a premium for such value-adding features. Investors aged under 40 are more interested in ESG investing than their older peers, and more than two-thirds prefer that their investments to have a positive social and environmental impact according to Cerulli associates.

Offering a unique value proposition: Lowest price doesn’t guarantee customer loyalty 
Wealth managers need to focus on delivering the values that Millennials want, which according to our survey are quality and brand. Price is not the most important factor that Millennials look for; quality, brand and convenience consistently rank higher across all markets worldwide, especially quality and brand in the UK. To stand out in the market, the customer experience needs to have certain "WOW factors". 

Our study has identified several key WOW factors that Millennials value, including 24/7 access, the option to select their preferred relationship manager, customised recommendations, fee transparency, and comprehensive and exclusive offerings.

An example of this ‘WOW factor’ is that Millennials expect to be able to access services with ease while they’re on the go. Wealth managers who only offer traditional modes of access risk missing out on building relationships with the next generation of clients. Banks need to make it easy for users to subscribe to their services and invest their assets. By simplifying the customer journey and reducing purchase barriers, banks have an opportunity to upsell and create more differentiated offerings.

Furthermore, having an open and transparent service architecture is key to retaining market share. Wealth managers need to present their offerings in an appealing and customised manner that Millennials can easily understand.  On average, each millennial has more than three banking relationships. Differentiated service tiers and smart packaging design that comprehensively address needs will hook customers to consolidate their primary banking relationship and allow banks to become the one-stop-shop for their financial needs.  

Finding the optimal price level: Measure willingness to pay and monetise effectively    
Wealth managers need to accurately understand Millennials’ price preferences and how they relate to the value drivers in order to extract value. What are the right metrics to charge? What should the price model be? How can it be conveyed in the simplest form? In order to get these questions right, traditional wealth managers need to understand Millennials and their preferences clearly, develop a roadmap on how to stand out against competitors, and have a clear idea of what different pricing structures mean for their bottom lines. 

Tech disruptors bring great uncertainty to the wealth management industry - banks have to act fast before they are outflanked. Winning in this market requires banks to rewire the core of their organisation and offer exceptional customer experiences. But with the right approach, there are ample opportunities for private banks to thrive. 

About the study: Silvio Struebi, Desi Soetanto, Ryan Lim and De Liu from Simon-Kucher & Partners conducted the international customer journey study in February 2019. Participants were asked to complete an online questionnaire that focused on the banking behavioor of the Millennial generation. The study involved 645 individuals born between 1981 and 1996 from six countries, which included Australia, China, Hong Kong, Singapore, the UK, and the US. Participants had either at least one private banking relationship in the family or at least 500,000 US dollars in investable assets in their personal accounts.