Financial Advisors: The Secret To Unlocking Next Generation Wealth

Meet the next generation of wealthy clients in Asia; ethically-minded, digitally savvy investors who live on a vastly different planet from their parents. Unlike their parents, this group tends to gravitate towards impact and sustainability investing, as well as all things technology.

These affluent youngsters also demand a different breed of financial advisors who understand their needs and are comfortable communicating with them in their native digital realms. To get on the same frequency, financial advisors are shedding their tailored suits and ditching the golf course to talk tech trends and green investments.

The shifting risk and investment profiles of clients resulting from demographic change has thrown up a host of new challenges for private banks and wealth management firms in Asia and the rest of the world. There is much to be gained from getting the formula right, however, as a generation of high-net worth individuals stand to inherit the largest accumulated wealth in history.

According to the Weatlh-X and NFP Family Wealth Transfer Report, the world’s current ultra high-net worth individuals will pass on $16 trillion worth of wealth to the next generation in the next three decades.

Asia, too, is also seen to be on the cusp of a significantly large transfer of wealth over the next 5 to 15 years.

This once-in-a-generation phenomenon is having an enormous impact on the wealth management game. For one, younger clients’ preferences for investment products and risk appetites differ starkly from those of their predecessors. While older clients prefer traditional asset classes like real estate and equities, their offspring have acquired a taste for private equity and technology sectors.

Private equity is gaining mileage among younger clients in Asia because of the huge growth of technology companies building an ecosystem in the region, like Grab and Go Jek. These investors understand the business models of these technology platforms and are keen to get a slice of the action.

Wealthy, millennial investors are also determined to do some good with their fortunes and have homed in on green and sustainable investments. For financial advisors, this means dropping traditional oil and gas securities from portfolios and replacing them with renewable energy plays.

In fact, more than 40% of the 45 financial advisors surveyed by research firm, Wealth-X, revealed that they were focusing on environmental, social and governance (ESG) themes to appeal to younger clients. Among other measures, this involves launching socially responsible portfolios or ESG services as part of their offering.

It’s all about the Tech

The generation gap among high-net worth clients is most stark when it comes to how each group chooses to interact with their financial advisors. While the boomers are still all about the face-to-face meetings with their (human) advisors, their offspring demand the 24/7 immediacy of messaging on their mobile devices.

Some are even bypassing their relationship with advisors altogether to trade and make investment decisions directly through digital platforms. In response to this trend, private banks and wealth management firms had developed or were developing new apps to allow their customers to invest more easily and have a holistic view of their portfolios at all times.

However, getting the hardware right is only part of the solution. To successfully engage next-generation wealth, financial advisors must also be prepared to adopt to change their mindset when dealing with this customer segment.


Source: Forbes 

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