The Changing Face of Wealth Management Customers

Adapted from a 2019 ABA research study on the state of clients, advisers and wealth management practices. Download the full report.

In 2025, the oldest members of the Baby Boomer generation will be in their late 70s; the youngest will be 60. The wealthiest generation in history, these Boomers are set to pass down a record-breaking amount of assets to their heirs. The largest intergenerational wealth transfer in history is underway. By 2043, an estimated $68 trillion will pass to succeeding generations, according to Cerulli Associates. Industry experts have dubbed this “The Great Wealth Transfer.”

This wealth is a combination of investable financial assets (equities, bonds, alternative assets) and non-financial assets (privately held business interests, oil, gas and mineral rights, farm and ranch land, investment and personal real estate and collectables). Most of this wealth will land with Generation X (those born from 1965 to 1979) and millennials (born from 1980 to 1994)—two generations that have very different spending, savings and lifestyle habits. High-net-worth individuals, families and their advisers must be prepared for the changes and responsibilities associated with this wealth transfer.

Eight Keys to Wealth Management in 2025

ABA research identified eight foundational aspects of what wealth clients will expect from providers going forward:

1. Differentiated life cycle approach, truly understanding where clients are in their financial lives and using that insight to serve them in an individualized way.

2. Clear value proposition on what the bank delivers for its fees, such as a longstanding tradition of fiduciary responsibility and full balance sheet financial management.

3. Leading with insights and advice, rather than pushing product, especially as products continue to become commodities, available from banks and nonbank entities alike.

4. Exemplary emotional intelligence to have deep, meaningful conversations that uncover clients’ aspirations and goals.

5. Ergonomic mastery, competence and efficiency in using the tools and technologies the firm has available to serve clients.

6. Expanded client engagement, with more client access to advisers to get individualized assistance and answers to specialized questions.

7. Effective use of client data to be able to anticipate the next big thing in the client’s life and offer forward-looking advice to meet that emerging need.

8. Social responsibility of the firm and its products—responsible investments that integrate environmental, social and governance factors into investment processes and decision-making.

For banks, this intergenerational wealth transfer comes in amid other perennial business challenges, such as growing nonbank competition, pressure to reduce fees and lagging technology. “One day we might wake up and find out that an Amazon wants to run a wealth management service,” adds Bill Martin, chief investment officer at INTRUST Bank and chairman of the ABA Wealth Management and Trust Conference advisory board. “We just need to be aware that possibility exists and be aware of the need to differentiate ourselves by driving very meaningful relationships.”

Wealth management clients in the coming decade will differ from their predecessors in many ways. The new client population will be more:

Multi-generational. In 2025 we’ll have five generations of wealth owners, with different perceptions about wealth, social mores and philanthropy. Gen X and boomers who stay in the workforce beyond traditional retirement age will still be wealth creators. Gen Z will be entering prime working years, on the verge of outnumbering millennials as the largest cohort of new wealth creators. And for the first time in U.S. history, older people (78 million age 65 or older) will outnumber children (76.7 million under 18).

Diverse attitudes about wealth. Each generation has been influenced by the economic events and social factors of their time, which have shaped their financial attitudes and values—and in turn, their expectations of wealth service providers. Gen X, millennials and Gen Z investors are more apt to look at environmental sustainability, social responsibility and governance of the companies they invest in. “Their areas of focus may be somewhat different from where mom and dad were 20 years ago,” says Marie Tormey, EVP and chief fiduciary officer for PNC Asset Management Group. “Responsible investing is more important to them, and they’re more socially aware than maybe was the tradition in the past.”

Cynical. During their formative years, millennials and Gen Z experienced the repercussions caused by the financial crisis of 2008 and the ensuing Great Recession. These events have shaped their perspective on governments, institutions, banks and brokers; and their perspectives are similar to those of the silent generation and contrast greatly to Gen Xers or Baby Boomers. These distinct perspectives are shaping wealth in motion, and advisers have to be sensitized to these dynamics.

Online. Younger investors are embracing robo-advisers, online investment clubs and social trading. They place a high value on crowdsourcing and the validation that comes from transparency and peer endorsement. According to PwC, “millennial investors seem to prefer information received from social media, which means they can participate without relying on traditional financial outlets, a financial adviser or an institutional analyst’s view of the market.”

Thinking in the now. Many younger people are more focused on transient experiences—travel, meals and events—than on accumulating wealth or acquiring physical assets, such as real estate. Furthermore, while millennials in particular have deferred major life choices such as marriage and children, they also often defer the need for traditional financial advice. “We look for ways to attract those younger clients who may not have the level of wealth that we would traditionally think a client should have,” Tormey says. “We’re thinking about how we can become their provider. Maybe it’s borrowing needs for now, but in the future they will certainly have assets amassed. We want to be there, having a relationship with them.”

Long-lived. Baby boomers have good odds of living to 80 and beyond. Millennials and later generations, provided they make it through middle age, could expect to live to 100. Longer range planning makes sense, says Mark Gim, president and COO at Washington Trust Company. “Clients need to consider the best way to preserve wealth and plan for money to last for a longer lifetime, which is more than just short-term performance. It’s more than saying, ‘I did 20 basis points better than the S&P 500.’ It’s managing wealth over the long term.” The advisers’ challenge will be to convince 20- and 30-somethings to buy into that delayed gratification.

What will wealth management advisers do differently in 2025?

In response to these trends, advisers will help clients manage their finances, build healthy portfolios and ensure their legacies are carried out in the ways they want. They will do this while accounting for a multitude of factors that influence wealth.

What changes is that in 2025, advisers will be serving five generations of wealth owners who hold varying perceptions about wealth, social mores, philanthropy—and what they want from an adviser. ABA research suggests that wealth advisers will have to adapt their practices in five key ways:

  • Focus more on proactive client outreach and business development.
  • Forge relationships with the next generations.
  • Continuously hone their skills and industry knowledge.
  • Provide more holistic advice for clients.
  • Provide more individualized service.

Clients are changing. Delivery expectations are changing. Technologies are changing. Advisers are changing. Regulatory requirements are changing. Taken together, these changes invite bank leaders to take actions today to lean in and ride on top of the wave to the future state.

“The banking industry needs to recognize that it is becoming viewed as a legacy niche player in the wealth management business,” Gim explains. “The perception is that the cooler, fast-moving, agile, nimble players are where you really ought to go when you want your wealth managed.”

Adapted from a 2019 ABA research study on the state of clients, advisers and wealth management practices. Download the full report.