It’s hard to ignore the Great Wealth Transfer, which claims Gen X, millennials, and Gen Z are poised to inherit $84 trillion in assets from baby boomers. Some tout it as the “biggest wave of wealth in history” and it has even led to a new nickname for Millennials as the “richest generation.”
But while these newer, younger investors might eventually be rich, many are ill-prepared and without existing financial advisor relationships. Younger investors like millennials are not engaging with wealth managers as much as their boomer benefactors … and some are not engaging at all.
This discrepancy is attributed to a lot of factors like a lack of financial literacy, the expanding and complex world of investing, and rethinking traditional milestones like retirement. But simply put, life is complicated for millennials and wealth management can feel complicated too.
As wealth shifts hands, wealth management firms will need to shift how they go to market to engage desirable new investors and capitalize on the “great wealth wave.” To do so, wealth management firms will need to re-evaluate their brand and innovation strategy to feel a little less complicated and reach new investors.
Times Are a Changin’
A popular meme today contrasts an image of a boomer couple smiling and buying a five-bedroom home with a disgruntled young person today buying a carton of milk, saying, “I may never financially recover from this.”
While this meme is mostly just for laughs, there’s truth in the fact that traditional milestones look different for younger generations. In fact, some may feel entirely outdated. Yes, this means delaying marriage, opting for pets over kids and more fluid employment, but it also signals shifts in long-term goals like prioritizing societal impact and charity.
Despite this, the same images of a “successful future” paper the walls of wealth management firms: a family of five skipping down a tropical beach or a proud husband and wife standing outside of a suburban home.
By widening the view of possible life paths and definitions of success, wealth managers can better engage younger investors. Some upstarts have clearly caught on to the gap between how established players go to market and the shifting priorities of younger investors. These new wealth management or investing upstarts are easy to spot—they’re colloquial and irreverent. While this certainly appeals to some investors, these newer players shouldn’t forget that credibility and trust still reign supreme in financial services, especially with higher net worth clients.
On the other hand, established private wealth management typically uphold the status quo. They can own a valuable whitespace of an established firm that can think beyond traditional milestones to help their offering feel more relevant to younger investors.
There’s Magic in Simplicity
One of the most common things I hear from wealth management clients is, “We do a lot of great things, but consumers don’t know about it. We’re a best-kept secret.” Typically, after getting to know their organization inside and out, they’re right. They’ve invested in proprietary approaches, advisor training and even great tech platforms. The problem however isn’t awareness, it’s the way they’re telling their story.
Most wealth management firms fall into the trap of competing on features and function, which ultimately just fragments the full value of their offering and confuses, rather than intrigues. Firms that can identify one simple story about their offering will win.
Inaction Can Breed the Best Innovation
A client once told me, “We can create the best widget around, but if it doesn’t help the customer do something they need done, then it actually doesn’t matter.” This idea echoes the Jobs to Be Done theory, coined in the book Competing Against Luck. It states that by understanding the progress customers seek to achieve, companies can systematically create winning products and services.
Simply put, if customers don’t see how your service can fill a need in their lives, they won’t use it. This may explain some of the inaction seen by the “richest generation.” The good news is that means wealth management is ripe for innovation.
To “systematically” innovate, as the Jobs theory suggests, firms can ask, “What workarounds are investors creating on their own?” Are they cobbling together 401(k) plans, managing self-directed accounts and trusting advice on YouTube or TikTok? If so, why? How can wealth management firms innovate to fill the need that’s being met by this clucky solution?
We can also interrogate the fact that 95% of Generation Z and 83% of millennial investors said they would consider wealth products and services offered by Google, Apple or Facebook. In a category where “fortress balance sheets” typically lead the conversation, we can ask what needs Google, Apple and Facebook fill that wealth managers do not.
Firms that evaluate the causes of inaction in younger generations will uncover ripe territory for innovation in wealth management.
All in All
The times are changing, and firms that can speak the same language as newer investors will have a leg up. Leading with a relevant yet simple story can help elevate the value of what wealth managers can do beyond features and functions. Wealth management presents fertile ground for innovation, as witnessed by inaction in the category. Firms who seek to innovate should consider the unmet needs of younger generations today.
Elizabeth Rodriguez is Associate Strategy Director at Siegel+Gale