Millennials are on track to receive around US$30 trillion of inheritable wealth over the next 15 years.

However, Gen Y are not content to rely on Baby Boomer family fortunes. The largest adult segment in the world is intent on growing its own wealth, too.

And that represents a massive opportunity for wealth managers and private bankers.

Great Opportunity – Even Greater Challenge 

There’s just one thing though. How does a traditional firm begin to create a mutually beneficial online relationship with a new type of client who has an innovative attitude to financial planning and strongly values his, or her, independence? For instance, when asked by the European Financial Management Association, 57% of millennial respondents stated that they would happily swap their bank for a superior technology platform, any day.

Preparation Is Everything

Deloitte points out that, historically, intergenerational wealth transfers have prompted 90% of the heirs to change their advisors. Also, EY reported that when assets change generations, firms lose 70% to 80% of those assets, and that 73% of clients are already engaged in relationships with more than one wealth manager.

Though not exactly an overnight phenomenon, wealth managers and private bankers need to begin building close, personal and digital relationships with millennials right now, in preparation for the financial tsunami.

But How Does a Traditional Firm Develop a Winning CX for Digital Natives?

Millennials are used to being the center of retail attention. Whether they’re buying food, flights or fashion, new technologies and customer-centric design smooth the browsing, selection and financial transaction process, enhancing the experience with intense levels of preference recognition and appreciation. Millennials’ spending habits are not easy to break and shoppers expect the same, seamless service across all channels and providers, including wealth management and private banking.

As a segment, Gen Y wants “fast”, “convenient” and “easy-to-use” – there’s no appetite for drawn-out onboarding sessions.

Outside In, Not Inside Out

Fintechs and other industry disruptors are already providing simple, crisp solutions. This is in sharp contrast to traditional wealth management and private banking offers which tend to be product-based, rather than centered on relationships and behaviors. Established wealth management firms will have to adopt and adapt quickly if they’re going to compete, successfully, in the personal finance for millennials sector.

Comparison with Other Industries

Wealth management in the mass-affluent segment is way behind other industries in adopting a customer-centric approach. For example, in the 1920s, Coca-Cola used product-centric marketing to describe the key attributes of the product. Thirty years later, their marketing strategy was enhanced by situation-specific advertising (e.g., boosting sales in the winter with “Thirst Knows No Season”). In the ‘60s, advertising targeted groups (“house wifes”) and, in the following decade, current stereotypes like “yuppies” and so on.

Then, in 2013, Coca-Cola began to sell personalized cans and bottles carrying the lyrics of popular songs with the intention of addressing consumers, personally. This novel tactic boosted sales by more than 15%. Today, German-based online store, Zalando, layers transactional data with other data types (e.g., seasons) to create client-specific offerings.

Wealth management offerings for the mass-affluent segment are akin to those of the ‘60s; solutions based on appetite for risk combined with other attributes (e.g., sustainability).

Supporting Next-Gen Services

Currently, millennials favor mobile-first, rather than traditional online banking. Looking ahead, however, a new development along the lines of the smart watch or VR could easily turn out to be their next digital banking channel.

Therefore, your next range of digital services will need to align with next-gen devices (e.g., Apple watch, Oculus Go, etc.). Similarly, digital natives – born between the early ‘80s and late ‘90s – prefer to “chat” than email. So, wealth managers and private bankers will have to partner with forward-looking tech engineers to develop a self-directed Investing for Millennials portal with advisor access, in support of a new chat function.

In addition, digital natives are more comfortable with technological ecosystems – another reason for wealth managers and private bankers to move away from product-based sales towards client-centric offerings based on needs and behaviors. They need to adopt the pure-play principles of digital companies like Amazon, who use technology to broaden and boost access to their marketplace.

So, Can New Technology Help Engage Millennials and Generate New Opportunities?

Of course, but wealth managers and private bankers must ensure that their technology supports highly customized offerings to clients, not standardized or product-based offerings. The use of client data such as interests and artificial intelligence (e.g., transactional behavior and social graphing) can help develop clusters of clients, analyzing their behavior to create predictive and customized, client-specific offerings. And holistic business-rules management will ensure that your millennials and money offerings are compliant and that they satisfy all client restrictions.

Flexible, Transparent and Channel Agnostic

The technology stack must be flexible enough to create an exceptional UX, an engine that allows users to model efficient client-focused processes and an open-banking platform with standardized APIs that allow you to onboard best-in-class apps and solutions in short order.

The stack also needs to provide data transparency and support a customizable, omnichannel, Financial Planning for Millennials service which is seamless and intuitive at the point of delivery – be that face-to-face, cell, tablet or PC. 

Sustainable success stands or falls on building the right technology stack to create the right offerings. UX, open ecosystems and owning the customer relationship are key retail characteristics of financial contenders who want to compete for this digital natives and coming generations segment.

Join Me Next Time

In the second of this three-part series of articles, I’ll be looking at ways in which technology can help you deliver the right products and services for specific wealth segments. And last, but not least, we’ll be discussing how technology can help democratize wealth management and access the mass affluent.

If you have any questions or comments about any of the insights in the series, please contact me directly at andre.mueller@excelian.com. I’m looking forward to reading your response.


André Müller
André Pierre Müller runs Luxoft Financial Services’ Wealth Management practice. André has been working in the financial services industry for over 20 years, mainly in wealth management, at the point where business meets IT. In recent years, he has been focusing on a hybrid approach to wealth advisory projects and is currently co-leading a multiyear, digital transformation program for a Swiss Cantonal Bank.