The Great Wealth Transfer pt. 1/3: A digital ultimatum for modern wealth management

As the world stands on the cusp of the largest wealth transfer in history, wealth managers are facing a pivotal moment. With 30% (!) of global wealth poised to change hands within the next decade, the stakes couldn't be higher.

In this article series, I'll zoom in on different trends related to the Great Wealth Transfer and wealth management, beginning with this article on digitalization.

Because this transfer isn't just about moving assets; it's a seismic shift that could see wealth managers left holding an empty bag if they don't tune into the digital frequency of their future heirs.

With 90% of heirs switching wealth managers, the message is crystal clear: adapt to the digital expectations of the next generation or risk being left on "read”. And it doesn’t make a difference whether you’re a family office, a wealth manager, or an advisor: digital maturity must be at the top of your mind.

Let me be clear: I’m not saying digital is everything. The human aspect is vital when it comes to creating relationships with clients. However, digitalization is imperative, and used right, it can be key when it comes to forging strong bonds.

Let's take a closer look at the digitalization-related challenges as well as opportunities this wealth transfer brings with it. Here goes.

The biggest wealth transfer ever seen

The impending wealth transfer traces its roots back to the post-World War II era, a time of immense growth and wealth creation. As this wealth prepares to shift to the next generation, wealth managers find themselves at a critical juncture.

The statistics are stark: 90% of heirs switch wealth managers after inheriting. The reasons are multifaceted, but a significant driver is dissatisfaction with digital maturity.

What NextGen expects from wealth management

Today's heirs, steeped in a digital-first world, expect more than their predecessors did. The digital divide between wealth managers and the next generation of wealth clients is not just a gap; it's a chasm. And for the traditional wealth manager, average age 57, it can feel wider than the Grand Canyon. This generation gap highlights a critical issue: the pressing need for digitalization in wealth management.

The next generation of clients isn't just comfortable with technology; they expect it to be seamlessly integrated into their wealth management experience. This includes everything from online portfolio access to digital communication channels and advanced analytics.

They don’t just want online portfolio access; they want the wealth management equivalent of a Spotify playlist: personalized, accessible anytime, anywhere, and, dare I say, capable of predicting their next favorite investment trend.

The demand isn't for technology for technology's sake but for a digital experience that enhances, simplifies, and personalizes wealth management.

As the chart above shows, the overall digital maturity of their wealth manager is already now the number one pet peeve among HNWIs along with the wealth manager’s digital interface for analyzing portfolio performance.

Think about it for a second.

These digital aspects are what the highest percentage of current HNWIs are unsatisfied with. Imagine what the numbers would look like if they represented the next generation.

If digital is an issue for you now, it will be your downfall after the great wealth transfer.

Surfing the digital wave or wiping out?

But there’s a silver lining, or as Albert Einstein probably would have said if he were a surfer, "In the middle of a wipeout lies the opportunity to catch the next wave”. For wealth managers ready to paddle back out, embracing digitalization isn't just about staying afloat; it's about riding the big waves.

Choosing a tech partner is crucial—enter Aleta, akin to the surfboard designed for the digital tsunami.

In the bustling marketplace of wealth management platforms, many options exist, but a notable portion of them don’t meet the demands of next-gen clients. These platforms often suffer from outdated designs and lack of innovative features and fail to resonate with the expectations of a digitally savvy clientele.

Aleta was deliberately crafted with the next generation in mind. It’s truly a next-generation wealth platform. From its unique user-centric and sleek design to the integration of cutting-edge AI, and the incorporation of essential climate metrics, Aleta is a tech partner capable of bridging the digital divide.

By teaming up with tech partners that prioritize these next-gen expectations, wealth managers can not only meet but exceed the digital standards of their future clients.

The partnership with the right technology provider isn't just an upgrade — it's a strategic move towards securing a firm position in the future of wealth management, where digital fluency and innovation are at the forefront.

Building relationships with NextGen clients

To retain the next generation of clients, wealth managers must do more than just upgrade their technology; they must also forge strong, lasting relationships. This involves understanding the unique needs, values, and communication preferences of next-gen clients. It's about engaging with them on their terms, in their language, and through their preferred channels.

Conclusion: A digital future

The great wealth transfer is not just a transfer of assets; it's a transfer of expectations. As wealth managers navigate this shift, their success will hinge on their ability to adapt to the digital demands of the next generation. The journey towards digital maturity may be challenging, but it's also filled with opportunity. For those wealth managers who rise to the occasion, the future is bright. After all, in the words of Winston Churchill, "To improve is to change; to be perfect is to change often.

In a world where every other client is unsatisfied with the digital maturity of their wealth manager, the message is clear: evolve or risk being left behind. But for those willing to embrace change, to continuously strengthen relationships with next-gen clients, and to choose the right technological partners, the rewards are immense.

The Great Wealth Transfer isn't just a challenge; it's an opportunity to redefine wealth management for the digital age.

In part 2 and 3 of this series, I dive into two other critical trends related to the Great Wealth Transfer, namely sustainable investment and the rise of the trusted advisor.

Sources

Campden Wealth: The North America Family Office Report

Capgemini: World Wealth Report

Deloitte: 10 Disruptive trends in wealth management

UBS: Global Family Office Report

&Simple: Simple Software Technology Review

&Simple: Simple Looking Forward