It is well known that different generations of high net worth individuals will have varying requirements from advisors. However, wealth management practitioners can address the challenges, this article argues.

Here is a guest contribution from Ileana Sodani, chief relationship officer of Pershing, part of the BNY Mellon group of firms. The article here addresses how advisory requirements of differing age groups can vary; this also carries implications for how wealth managers recruit. It is of course possible to exaggerate the differences – there are points in common between a thirty-something entrepreneur who has made his or her first fortune and a retired City executive. It is not always the case, either, that the older generation of high net worth persons will be less inclined to embrace technology because retired people often have more time to engage with tech than a young, busy business person. 

We hope readers find these comments valuable and invite responses. The editors of this publication do not necessarily share all the views expressed in guest articles but are grateful for such contribution to debate.

One of the keys to success is to engage with clients at the right time, about the right thing, in the right way. It sounds simple, yet can be difficult to achieve. Identifying the trends that would help advisors better understand different client segments is paramount to their success, especially at a time when clients’ needs and preferences are so varied and complex. The messages that appeal to one segment could potentially alienate another. Digital innovation means there are more ways to communicate with clients than ever before. If one size ever did fit all in wealth management, it definitely does not today, due principally to the dichotomy of needs between clients under the age of 35 and those over 65.

Advice with a purpose

One way to ensure relationships get off to the right start is to understand why clients seek advice in the first place. Digital Horizons, our survey of 1,000 of the UK’s wealthy population, shows that relatively few clients - just 18 per cent - simply seek general financial planning. Instead, most clients approach a financial provider because they want support to navigate a major life event. 

Many of these key life events take place between the ages of 38 and 50 years. For example, a pay rise, location change or making provision for children are life events requiring planning. By the age of 45, property finance is a dominant theme but later-life marriage, divorce and re-marriage also prompt the need for financial advice during this period. 

While life events are the catalyst to engage with financial providers for those between the ages of 38 and 50, do not overlook the younger generation. Some of the most financially significant events such as selling a business happen before the age of 38. When you realise that 25 per cent of the business sales are for more than £500,000 ($715,172), this highlights the need for financial advice and planning. The challenge for advisors is that younger clients are more likely to shop around between each life event, switching provider until they find the right fit. Advisors need to concentrate on what the right fit looks like and determine how to communicate and engage effectively with this age group. 

Communicating with clients – the role of digital

Let’s be clear: digital no longer counts as innovation. Online services are not only expected, but are well used by clients of all ages. Half of clients manage their financial affairs mostly online and 26 per cent say they are fully online, carrying out all tasks via web-based platforms.

This does not mean that the digital proposition is replacing in-person advice and should not be considered the sole method of communication to retain clients indiscriminately. Some 20 per cent of clients say they deal primarily with a named advisor who offers the support they need. Favouring this personal contact doesn’t mean you are a digital laggard. In fact, many of these clients are young individuals who want wealth management solutions that combine high-quality online services with high-touch advisor-led services. The good news is that the next generation realises that such high-touch service has a cost. Many are willing to pay to access online services that connect them more efficiently with their wealth. 

You may think that older retirees are the least enthusiastic for online wealth management, but not all retirees are traditionalists. Around 30 per cent use the online services offered by their financial provider. Retirees may have a more traditional approach to wealth management in the main, but they find online services useful in certain circumstances. 

Moreover, this older generation has a higher expectation that their financial provider can integrate online services seamlessly into the wealth management solution. With the right online solutions in place, wealth managers can expect reasonable numbers of their retired clients to adopt and even start to rely more heavily on digital channels. 

Providers must continue to develop propositions that very clearly articulate the value on offer for diverse client segments, and then execute that service to the highest standard, through the right channel for their client base. The next generation has signalled its preference for a constant stream of two-way interaction with a digital option for self-service. 

It is now up to wealth managers to find innovative, cost effective models to ensure they communicate with clients as expected to avoid their switching to the competition.