Wealth Management for Younger Investors Demands New Approach by Banks, Survey Shows
A survey of 1,200 wealthy investors released yesterday found that the difference between older wealthy investors is not a gap — it’s a chasm.
Key findings from the survey, conducted by Cisco (oddly), revealed that younger investors’ are more comfortable with technology, but lack of confidence in professional financial advisors.
Younger investors — defined as 55 years old or under; “wealthy” means having investable income of $500,000 or more — are more involved in the active management of their finances, perhaps because their portfolios are less settled. 36% of younger investors spend more than 10 hours a week managing their investments, versus 18% for older investors.
Banks should pay close attention to those younger customers to avoid serious attrition, according to Cisco’s report.
Younger investors hold 37% of the investable assets in the country, or about $31 billion.
It used to be that banks used a one-size-fits-all approach with wealth management, said Jorgen Ericsson, vice president of global financial services for Cisco’s internet business solutions group. After all, aren’t all wealthy people alike? But Ericsson argues that such an approach isn’t best, considering the data.
Offering up financial advisors to younger investors might not work, for example. Younger investors are less trusting of and less loyal to professional financial advisers, according to the survey. Only 29% of younger investors in the US “trust” the investment advice they receive from financial advisers more than the advice they receive from fellow investors.
Two key technologies that younger investors are more comfortable with than older investors are video conferencing and social media. 61% of younger investors want the option to interact with their financial advisers over video, versus only 34% of those over age 55.
Social media is also more important to younger investors. Younger investors trust their peers’ advice (27%) about as much as they trust professional financial advisers (29%). Compare this with older investors, only 4% of whom trust their peers and 60% of whom trust professional financial advisers 18% of younger investors asked peers for recommendations of professional advisers over social media.
(Cisco tells Bank Innovation that it is working with four banks right now to help them leverage technology in wealth management.)
The opportunity — and risk — for banks is huge. 27% of wealthy investors have no financial advisers at all, and two-thirds would be willing to work with one under the right circumstances. In order to grasp the opportunity of working with younger investors, banks must offer a mix of self-service options and interaction with professional advisers over video and via social media. Banks must be willing to offer cutting-edge technologies to these investors, who use them in their jobs and personal lives every day.
The rewards of netting these customers are obvious. The risks of missing out on them could be catastrophic as older investors leave the field and are not replaced.
