Client Affairs
Why Wealth Management Needs More EQ Than IQ

The Swiss bank gets into the subject of "emotional intelligence" when thinking about how wealth management needs to develop in future.
One of the ironies about our current interest – or even
obsession – with artificial intelligence is that it runs in
parallel with heightened awareness of human behaviours that
cannot be stuck into a rational box. What is known as behavioural
finance, for example, has changed how people think about how they
act as investors and economic actors. We are not as free from
biases and habits as we think. Evolutionary psychology yields
insights. But self-awareness can lead to more control – to
know oneself is also to improve self-mastery, as philosophers
going back through the ages appreciated. More broadly, having an
understanding of what is called “emotional intelligence” is
necessary, and it is not a “soft” skill (“soft” can be
misleading, given the magnitude and complexity of emotions).
The author of this article examines this terrain. She is Viola
Steinhoff Werner, founder, Young Investors Organization, and head
of Global Next Generation and Families at Credit Suisse.
The editors here are delighted to share these views with readers
and invite readers to respond. Email tom.burroughes@wealthbriefing.com
Constant global connectivity, instant digital information and
widespread artificial intelligence (AI) will be a reality in all
aspects of life for digital natives in the future. The world of
wealth management, however, must recognise that it has to follow
another path, a more human-driven one, a more personal and
emotional one, especially for the top segment of the wealth
pyramid and in particular for their heirs.
The Next Generation’s power
In the next few decades, it is estimated that over $30 trillion
of wealth will transfer to the next generation in North America
alone. This Next Generation, on the brink of moving into the
driver’s seat of their inheritance, is seeking more than an
old-school banking relationship. This is especially true after
the global financial crisis in 2008, which strained the
relationship between banks and their clients.
As founder and general manager of the Young Investors
Organization (YIO) – a network for the next generation of the
world’s most influential families, sponsored by Credit Suisse – I
have been working for over 13 years with this cohort and have had
the chance to understand their characteristics and the driving
factors behind their desire to live with passion and purpose. If
there is one thing I have learned in this past decade, it is that
the reality of the Next Generation is often very different to how
it is portrayed in the media, particularly concerning wealth
management.
Yes, technology and AI will be key, but the human touch will
trump all.
The YIO members – who have grown in number from 200 in 2007, to
some 1,500 spread around the globe – fully represent the values
of this generation’s distinct philosophy. It’s a generation that
is united in their desire to leave a mark and has a strong sense
of collective responsibility for the wellbeing of the world.
At the same time, they are digitally savvy and born to a world
with a free flow of information. They're used to comparing, used
to having services anywhere and at any time at the touch of a
button. For this generation, a wealth manager has to offer more
than what is simply available at the swipe of a touch screen.
Making social impact the norm
The Next Gen thinks about investments in terms of risk and
return, like previous generations, but they also factor social
impact heavily into that equation – considerably more than their
parents.
Only 20 per cent are happy with current investment objectives and
the allocation of their family wealth. This means that they plan
to make big changes in portfolio management once they take
control. The growing importance and drive for social impact will
therefore have a lasting influence on how wealth managers serve
this growing client base. With more than 50 per cent of the
world’s population under 30, this should not be
underestimated.
Furthermore, this is also an issue that can be best addressed,
not through high tech, but through personal knowledge and
understanding of the client, to better hone in on the themes
close to their heart and to provide uniquely tailored solutions.
Artificial intelligence will indisputably support and enhance the
existing wealth management approach to sustainable and impact
investing but it will not replace it.
From relationships to lifelong partnerships
As the next generation of the world’s wealthiest, slowly and
sometimes abruptly are given control of their family’s wealth,
their challenges will be multifaceted and highly intricate. The
world may have become smaller thanks to communication,
internationalization and high-tech but it has also become more
volatile and more complicated.
I have met members of the YIO who, at a young age, have
opportunities others can only dream of, but sometimes also
responsibilities that not even an experienced, international
manager could deal with easily.
The Next Generation seeks not only financial advice. At the top
of their list of priorities when assessing a wealth manager are
strong personal relationships. This means wealth managers will
have to become honest, lifelong partners assisting in finding and
achieving original, sophisticated and very specific goals,
providing connections, linking sources and finding unique
solutions. The Next Generation is clearly high tech - but in
this new world they are also high touch.
They will transform the wealth management industry from one based
on relationships with clients to one based on all-encompassing
lifelong partnerships.
AI will be key in further developing transparency in the industry
and supporting complicated number crunching, but it will also
soon be the norm. AI will not be the differentiator.
What will? How will wealth managers ensure successful transitions
between generations? How will they help to identify and realise
their clients’ dreams for a better society? This is where the
human factor will always trump AI in wealth management -
according to the Next Generation.