Managing Wealth for the Next Generation of Clients

With the aging of today’s customers and the upcoming transfer of assets, many wealth managers are faced with the challenge of retaining next-generation customers. This next-generation has grown up in a completely different context. So the question for wealth managers is what does this generation really want from their advisors, and how should they adapt to this new set of needs and wishes? These are some of the questions that have been answered in our webinar with Viola Werner, Head Global Next Generation and Families at Credit Suisse and CEO of The Family Institute, and Dr. Andreas Zingg, Head of Switzerland and Liechtenstein at Vanguard.

Next-generation clients are more tech-savvy and generally more interested in investing than their parent’s generation. They also prefer do-it-yourself services, where the consumer now completes tasks previously delegated to others. The previous generation used to go to travel agencies to book their vacation. The current generation books their vacation themselves. Consequently, next-gen wealth management clients do not want to delegate their money to a wealth manager. They are seeking advisors, not managers, who need to act as coaches and who have to understand the client’s goals. The next-generation wealth manager listens and understands their client and presents the financial tools and strategies to achieve these goals. That explains why, even though these clients appreciate (or even require) tech platforms, the quality of the human interaction remains critical.

At the same time, the next generation is price sensitive and has all the tools and information to compare prices of different providers. When a wealth manager charges more, they want to understand what they get in return. But providing high-quality advice is costly. Consequently, the big challenge of future wealth managers is to provide financial “coaching” so that clients can conduct their investments on an advanced tech platform while offering a competitive price.

Next generation clients have a strong demand for educational programs and direct investment opportunities. Viola pointed out the importance of starting the financial education process as soon as possible. Andreas stated that the data shows that younger investors like passive investment solutions such as those offered by Vanguard and are less active traders than older investors. It is thus critical to provide more education because conducting direct investments without the proper education usually leads to bad performance.

In terms of product offering, the next generation’s demands investments with a clear impact. This goes beyond sustainability. They are interested in investing directly in promising start-ups and entrepreneurs. Regarding sustainability, they prefer not to invest in unsustainable companies rather than investing in particularly sustainable companies. This would favor basic exclusion strategies and is also why ETFs that exclude non-sustainable sectors are the most in-demand. They do not sacrifice returns or diversification for sustainability. However, research suggests that basic exclusion strategies do not have a tangible impact. An “own and engage” approach is more effective in moving businesses to be more sustainable.

“In our global next-gen report, we asked ‘what are the 10 questions you would like a relationship manager to ask you?’ There was not a single financial question! There were questions like ‘What do you do on a daily basis that really motivates you? Where do you see yourself in 3 years?’ It means that you [the relationship manager] have to financially advise but also become a coach.”

Viola Werner, Credit Suisse

“[As an asset manager] you have to ask yourself do clients actually need what they want? We have the luxury to say if our clients do not need this product we just do not offer it. (…) We don’t follow the commercial trends that make sense for the provider but not the client.”

Dr. Andreas Zingg, Vanguard Switzerland