Three strategies to attract new clients in wealth management

Three strategies to attract new clients in wealth management

What’s driving people away from traditional wealth managers towards digital-first firms? Industry experts offer their strategic solutions.

Author: Wealth Dynamix –


28% of High Net Worth (HNW) clients plan to switch wealth managers over the next three years. This is the latest finding from the 2021 EY Global Wealth Report. Notably, they’re planning to move their money over to FinTech platforms, which enjoyed a generous boost over the 2020 lockdown period. 


Over the next three years, these platforms are anticipated to see a whooping 74% increase in usage. Deloitte predicts that the US robo-advice industry alone will hold as much as $7 trillion in assets by 2025.


So, what’s driving today’s millionaires away from traditional wealth managers and into the arms of digital-first firms? Industry experts share their candid thoughts and offer strategic solutions.


Watch the original panel discussion here which took place at the FinTech Global Digital Wealth and CX Forum


Strategy 1: Create relationships with financial literacy tools

“When we talk about younger people coming into the financial services space we absolutely have to talk about education”, explains Morgan Stanley’s Director and Chair of the Risk Committee, Terri Duhon. “Because it is a world full of vocabulary and it looks complex. And the fact of the matter is it really isn’t… Somehow, we in the financial services industry have really made it look as complex as we possibly can, and that’s a shame.”


Across the investment landscape, younger investors tend to feel less confident about how to reach their investment goals. This can lead to cautious investing – an unfortunate irony, as investors with longer time frames generally should be taking more risk.

Added to this tentative approach, younger investors can also suffer from short-term thinking. A concept that Head of Product Strategy for Wealth Dynamix, Dominic Snell believes should be addressed early on. “I think when people are very young, it’s really important to educate them on this idea of delayed gratification”, he elaborates. “And I think that millennials, or very young people now, they’re so used to having things very, very quickly, like immediately, and it’s actually a big problem”.


There’s no doubt that many young people will become extremely wealthy, in what’s referred to as The Great Wealth Transfer. In North America, $8.8 trillion is expected to change hands before 2030, from one generation to the next. And many will not inherit from their parents, with the benefit of family office wisdom to fall back on. They will need to rely on their own financial intuition to make the right decision. This is particularly true among Millennial women, who are becoming increasingly entrepreneurial. Today more than half of HNW Millennial women created their own wealth – compared to just 37% of HNW Baby Boomer women.


These self-made Millennials will be the first in their family to select a wealth manager. And so, without financial literacy, there is a very real threat for today’s firms that this new breed of investor will bypass advisors altogether. They could head straight to robo-advice without considering other options.


“These self-made Millennials will be the first in their family to select a wealth manager. And so, without financial literacy, there is a very real threat for today’s firms that this new breed of investor will bypass advisors altogether.”


 One way to overcome this hurdle – while also doing a good social deed – would be for forward-thinking firms to provide tools and games to improve general financial literacy. “Financial institutions and perhaps even technology, and even apps and games, if they can start to teach people [about] investing and waiting for that delay of gratification, that could actually help”, explains Snell.


HSBC’s Head of Business Management for Customer Channels, Roohi Gupta agrees, “What wealth tech can actually do is allow us to teach customers about the concepts – because let’s be real; wealth investment is a very overwhelming topic for somebody who’s not from this industry”.


Gamifying financial concepts is relatively straightforward solution. And it could prove to be the most cost-effective investment wealth managers will ever make. It would help to build loyalty from an early age, with positive brand associations with a new generation of customers. Most importantly, explaining the differences between – for example, active and passive management – could help steer potential clients away from robo-advisors and towards traditional firms.


Strategy 2: Stop recycling portfolios, build new ones from scratch

Women are more likely to switch wealth managers than men. While there are many reasons for this, perhaps the most obvious is because the wealth products women are offered are rarely built for them.


“All the financial space at least until recently has been built for men”, elaborates Luc Haldimann, Founder and CEO of financial software provider, Unblu Inc. In a recent BCG survey, 63% of female respondents felt that their wealth manager needed to improve its value proposition. There’s an ongoing issue within the investment industry, where products created for men are being re-packaged with marketing designed to attract women. Like spray-painting an apple and calling it an orange. But recycling products which suited a by-gone generation will not work. What’s needed are a suite of new products, intentionally built for the fresh wave of HNW clients. According to Haldimann, the best place for portfolio-builders to start focusing their efforts would be on this ever growing segment of wealthy women.


“I believe the biggest group of underbanked people are women today”, he reveals “There is a huge shift of wealth to women in the next five years – I think the majority is going to be women”. Haldimann is not wrong. Women today hold more than 32% of the world’s wealth, make up 15% of Ultra HNW clients, and those figures are rapidly compounding. By 2023, women are expected to hold $93 trillion.


Every woman is different, of course women cannot be treated as a homogenous group of investors. But there are some characteristic trends firms should prioritise. For example, 64% of women will factor environmental, social and governance (ESG) criteria into their portfolio. And this becomes more of a priority as their wealth grows. For some, this could mean a high allocation towards climate mitigation, while for others it could involve greater exposure to women-owned businesses. Using data collected by machine learning programmes and personal interactions, managers could build a range of different portfolios, better suited to female preferences.


What’s more, firms could also benefit from providing more detail when it comes to investment opportunities. “It’s not that women are more risk adverse from our research”, explains Haldimann. “It’s they want to know more details; they want to understand what they’re doing more”. These extra details, it turns out, are a huge part of why women make better investors than men. A study by Warwick Business School found that women investors research investments more thoroughly, leading to 1.8% higher returns than their male counterparts.


But it’s not just women who need more details and new investment products. “I think this applies not just for women, but also for younger people – millennials but also generation Z. People want to understand more”, explains Haldimann.


Senior Vice President at Northern Trust, Nina Jones agrees that this characteristic blend of detail-orientated ESG investing will continue to thrive. “I’m excited by, the engagement of investors in their own financial affairs, particularly with a focus on ESG”, she explains. “I think that this is going to be a huge force for good in the global economy over the coming decade”.


As women become more recognised as value-adding investors, other previously side-lined groups are coming to the forefront too. The 2021 World Wealth Report highlighted the plight of LGBTQ+ investors. A meagre 41% of whom felt that their wealth manager understood their unique needs.


Breaking out of the straight, white, male Baby Boomer box is essential for wealth managers looking to future-proof their offering. New investment products and marketing must be designed with the full spectrum of today’s investors in mind. The first step to this journey is collecting client data, which can be easily gathered and presented into reports with analytical technology.


Strategy three: Increase convenience and simplicity with a hybrid model

“The two big boxes to tick in terms of ultimate experience are simplicity and convenience”, explains Jones. “[Across] digital transformation in the rest of the world, particularly the retail sector, leisure sector, those are the two things which time and time again have proved to be successful”.


This, according to Jones, is one of the major differentiators between Millennials and their Baby Boomer parents. “Millennials have proved that convenience trumps privacy, possibly because there is a generation of people who’ve grown up without that expectation of privacy”, she explains.


Convenience is one of the most important features that will make a product stick over the long-term. A century ago, people moved away from the individual local stores their families had been visiting for years, in favour of the supermarket. Convenience wins over the long-term, even if it means sacrificing loyalty.


Jones puts it into perspective, demonstrating how the value of time is playing an increasingly important role in our lives. “In terms of my own consuming habits, I regularly pay more on Amazon because it saves me having to go and get the tube into town to go and buy something from a shop”, Jones elaborates. “That’s time that I’m not spending on my children, not spending doing some of the things that I would love to do. Instead, I pay more for often a less good product for something that I could go to the shops and buy.”


Across the panel, all the experts agreed that technology has an undeniable role to play in creating more convenience and simplicity. To date, 47% of Millennial and Gen-Z HNW individuals are unsatisfied with their firm’s overall digital maturity. What’s more, 50% of HNW investors under the age of 40 would like to opt for purely digital advice from their firm, with zero face-to-face interactions.


Significant life stages, such as coming into an inheritance, usually prompt clients to seek human advice. As Snell explains, it’s not the generation of the client, but rather the experiences they are undergoing which tend to determine if they’d prefer digital or human advice. “Research points to the fact that it’s not the segmentation by age that really determines whether things are adopted… that’s a slightly old fashioned way of looking at things”, he explains. “When there’s a need to have that human touch – whether that’s a life event or something else – that’s what determines whether the channel is right or wrong for that situation”.


The best strategy for wealth management firms, according to Gupta, would be to offer digital service with human intervention at key life stages. “The millennials at this point are anything between 25 year olds to 40 year olds. That’s a huge range. Some of them definitely want to self- serve, but then there’s a whole lot, the affluent millennials who probably are at the cusp of making really complex decisions where they want that human interaction”, she explains. “So, I think the key is get digital right, but also intersperse it with human interactions. Have a hybrid world”.


Jones agrees, “You can offer that flexible opt in / opt out model in a much more holistic way through using digital technologies”. Creating a seamless hybrid service could help wealth managers retain, as well as attract clients. The blend of technological and human interaction could truly combine the best of both worlds.


Strategies to future-proof wealth management

There is no one-size-fits-all tech strategy because wealth managers are as diverse and multifaceted as the clients they serve. However, there are key areas of focus which all firms should prioritise, such as nurturing financial literacy, inclusion, and convenience. All these areas can be accelerated and carried by technology, but ultimately, it’s the humans in charge who need to direct these goals.

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