As has often been reported, we are in the midst of the biggest generational wealth transfer in American history. A whopping $84.4 trillion in assets is estimated to be passed on from baby boomers to their Generation X, millennial, and Generation Z children by 2045, according to Cerulli Associates. In spite of the omnipresence of this statistic, many advisors do not have plans in place to capture the assets that will pass from their existing clients.

In fact, studies suggest that most of the baby boomers’ heirs plan to switch to a different primary advisor after they receive their inheritance. A UBS Wealth Management Investor Watch report from the second quarter of 2018 (“Money, Myths, and Modern Families”) found that 66% of millennials expect to change advisors. Another study from that same year, from Cerulli Associates (“Cerulli Edge—U.S. Advisor Edition” from the fourth quarter of 2018), reported that more than 70% of heirs will likely fire their financial advisor, or find a different one, after inheriting wealth from their parents.

Advisors need to reverse this trend by reinforcing the value they can provide, and delivering experiences that help clients appreciate and recognize their value proposition. We believe the next generations of clients expect a hyper-personalized digital experience with solutions and content that are tailored to their individual needs and preferences. According to a 2018 Gartner report, 67% of consumers believe it is very important for content to be automatically adjusted by brands to fit their circumstances and interests—and the study also reported that 42% of consumers find it annoying when brands don’t do so.

Furthermore, a Broadridge Financial Solutions study published in July 2020 found that investors want more personalized communications from their financial advisors. When asked what type of information they would like to see tailored to them in advisor communications and technology platforms, 44% of surveyed investors responded that they would like to see comprehensive views of their accounts, and 32% said they would prefer tips on saving money which are personalized for them. Meanwhile, 32% of surveyed investors indicated they would want ideas for new investment vehicles that could help them meet their goals, and 29% said they would like a customized analysis of their investing habits.

The Way Forward
Advisors can consider adopting digital technology platforms, which enable their practices to offer these types of hyper-personalized offerings within transparent, convenient, and holistic experiences—and do so at scale as their businesses grow.

Baby boomers’ Generation X, millennial, and Generation Z children are more comfortable with securely sharing data to allow providers to serve them better. Adopting digital technology that can unlock opportunities for personalizing investment advice, automating the investment process, and creating content and experiences that align with clients’ preferences can potentially reap enormous long-term advantages for advisory practices:

• A Higher Level of Service: Advisors and wealth managers can offer a more personalized investment experience when they tailor investment solutions to individual client needs and preferences, allowing them to build stronger client relationships and improve client retention.

• Reduced Costs And Greater Efficiency: The automation of the investment process gives advisors the power to deliver personalized investment advice to clients without spending more money or hiring more people.

• Professional Differentiation: Offering investment solutions and advice that meet the specific needs of individual clients can help advisors demonstrate more value to clients, and differentiate themselves from competitors.

Ideally, advisors can implement digital technology platforms which can intelligently connect all areas of a client’s financial life—and provide data-driven insights to help clients make smarter financial choices for meeting their immediate and long-term needs. These end-to-end technology ecosystems can also empower advisors to identify the most suitable investment strategies for individual clients, and demonstrate greater value by helping clients further diversify their managed account portfolios beyond the typical mix of equities and fixed-income securities.

For example, advisors can help clients construct portfolios which replicate an index of investments with individual securities, instead of just purchasing an index fund or exchange-traded fund (ETF). In doing so, advisors can incorporate tax-loss harvesting, sustainability goals, factor tilts, and other tools to help client portfolios outperform benchmarks.

With the largest-ever intergenerational wealth transfer in full swing, advisors need to stay one step ahead to engage the next generation of clients. The capability to provide a hyper-personalized experience is key for maintaining relationships with, and meeting the expectations of, Baby Boomers’ children. Technology solutions that unlock opportunities to personalize the client experience across an advisor’s practice, at scale, can give advisors the power to survive, and thrive, going forward.

Dana D’Auria, CFA, is co-chief investment officer of Envestnet and group president of Envestnet Solutions.