The challenges of the global pandemic and changing economic and societal priorities have turned the world sideways: this is as true in the wealth management realm as it is everywhere else—clients are seeking more and different from their service providers, and they expect change to happen now. When it comes to serving the needs of high-net-worth individual (HNWI) investors, new client segments are emerging, but many wealth management firms are not connecting with the next wave of clients.
According to Capgemini’s World Wealth Report 2022, most firms lack customized, segment-specific products and services: for example, only 37% provide offerings aimed at women, 22% for millennials and 53% for tech-wealth HNWIs. Let’s take a closer look at what our research tells us emerging high-potential segments require from their preferred wealth management providers.
Women Want Firms To Earn Their Trust And To Support Their Unique Needs
Women across all wealth brackets will inherit 70% of global wealth over the next two generations and will likely manage two-thirds of household wealth by 2030. However, our survey revealed that many women are less confident in their ability to manage and grow wealth during the next 12 months. Wealth management firms should consider offering investment education and tools to female HNWI clients to engage and enhance their confidence to increase trust and deepen relationships.
When selecting a primary wealth manager, women seek quality service, transparency in fees and products, and data privacy and security. Today, women investors are also seeking purpose as well as returns. Rather than an exclusive focus on money, their goals include connection, meaning, a legacy for the next generation, and making a difference from an environmental and social perspective.
Millennials Seek Digital Engagement, Learning, Value And Transparency
Millennials are tech-savvy digital natives who prefer self-directed investments with minimal guidance from wealth managers; this segment likes to work with robo-advisors and new-age tech companies. During the next few decades, the most significant intergenerational wealth transfer—more than USD30 trillion—will pass from baby boomers to Gen X and millennials, and so it was no surprise that 58% of respondents say they are already working closely with the children and beneficiaries of existing clients.
Millennials also prefer a mix of in-person and virtual interactions for advisory services and information search but prefer more fully self-directed transactional and educational touchpoints. More than half (53%) of the millennials said they had changed their primary wealth management firms in the past year; they changed firms due to high fees (46%), lack of transparency (39%), and slow service (33%).
Tech-Wealth HNWIs Seek Active Investing, Personalization And Consolidated Services
The number of tech-wealth billionaires increased by 51.5% in 2021 as compared to 2020 levels. Tech-savvy HNWIs demand active investing, personalization, and consolidated services from their financial services providers, and 60% prefer family offices over large banks or wealth management firms.
73% of tech-wealth HNWIs switched their primary firm after crossing the USD1 million threshold. A lack of an attractive product portfolio and low digital maturity were the top reasons for switching firms. Tech-wealth HNWIs use, on average, five firms to manage their wealth. They support startups and want to share their expertise and experience by investing in tech innovation.
LGBTQ+ HNWI Clients Seek Inclusive Services That Enables Them To Live Their Best Financial Lives
As with other segments, opportunities exist for wealth management firms to better meet the needs of LGBTQ+ individuals and families who often face financial and legal system complexities during pivotal events (marriage, domestic partnership, family expansion, home purchase, retirement). An inclusive approach encompasses the entire financial lives of LGBTQ+ HNWIs—from investments to tax strategies, estate planning, charitable and legacy planning, as well as risk management. Our wealth manager survey revealed that 30% of advisors say they don’t understand LGBTQ+ client needs. Meanwhile, 30% of LGBTQ+ participants in our HNWI survey said they lack trust and confidence in their primary wealth management firm.
Of course, understanding every client’s unique needs is key: inclusive and affirming human interaction and nuanced judgment between will enable service equal to that offered to other valued HNWIs.
The Time To Act On New Client Segment Priorities And Demands Is Now
While the unique priorities of each segment need careful attention, one thing all these new investor segments have in common is a keen interest in new investment opportunities. 91% of HNWIs under 40 have invested in digital assets, and 55% of HNWIs say investing in causes with positive ESG impact is a critical wealth management objective. As clients become more interested in ESG investment options, wealth managers are going to need to expand product selection, build educational support, and develop capabilities to measure and communicate ESG focus and results.
Perhaps even more important is their strong desire for individualized and ongoing engagement: customized journeys across financial and personal lifetimes. To meet and even exceed these new and complex expectations and capture growth, wealth managers will need new business models and improved ways of delivering more personalized and responsive service, augmenting overall client experience.
Nilesh Vaidya is executive vice president at Capgemin.