The art of courting wealthy millennials

by David Chung, Silvio Struebi and Simone Schuettel  

When it comes to their private banks, millennials are not happy.

In a Simon-Kucher survey of private banking clients born between 1981 and 1996, close to half (46 percent) said they are unhappy with their current wealth management provider. They are also not loyal. Among their gripes: unappealing product offerings, unattractive investment recommendations, inexplicable fees, awkward digital processes, and impersonal service.

These findings are alarming. Millennials, who will outnumber all other age groups in the labor force by 2029, are approaching their peak earning years of between ages 35 and 54. These digital natives also stand to inherit more than $22 trillion by 2042, according to Cerulli Associates. It will be one of the largest intergenerational wealth transfers in history.

Unless private banks can convince millennials that their services are worth the price they are asking, they will lose a good majority of their client base in the years ahead.

Quick fixes like adding cryptocurrency, robo-advice and ESG benchmark scores are good starting points, but they will have limited success on their own. Rather the industry must recognize that its current approach of client servicing requires a fundamental rethink.

This includes the practice of charging clients a flat fee, generally 1-2 percent of assets under management. This pricing model assumes that wealth is an indicator of needs and fails to account for clients’ unique situations and preferences. Under this model, a millennial, baby boomer, and Generation X prospect with $2 million in investable assets are all presented with the same list of product and service options, and the same customer experience.

To satisfy the needs of an increasingly diverse and complex client base, wealth management firms must look past the old one-size-fits-all model to take a modern, research-based approach. By using value-differentiated service levels coupled with transparent pricing, tailored experiences, and advanced self-servicing, private bankers can more easily defend the value of their offerings and win the hearts of millennials.

Stand out with high-touch digital capabilities

The wealth management industry’s current practice of offering largely undifferentiated, homogeneous services to all clients is a barrier to growth. To the millennial, every private bank seems to be promising essentially the same thing.

Against this backdrop of sameness, fintech disruptors flaunting their smart tools and clever dashboards have successfully attracted billions of dollars in investable assets from millennials. According to our survey, as many as 80 percent of millennial private banking clients said they are either considering or are currently using fintech services to help manage parts of their money. These millennials plan on allocating more than half of their investable assets with fintech wealth managers.

Private bankers must start to build differentiated value propositions based on a sophisticated and accurate understanding of the millennial client. For example, one private bank noticed younger clients were less likely to respond to product pushes on traditional offerings like in-house funds or structured products, preferring instead to receive trading tactics and highly tailored out-of-the-box investment ideas.

The private bank responded with an investment toolkit accessible via a mobile app or website. The bank used push notifications to send clients timely recommendations supported by strong rational and research, based on their interests, past behaviors and portfolio positions. Clients also had the option to pull or browse investment themes, and access research and buy-sell recommendations from the app.

Another global private bank identified the features in their advisory proposition that clients most valued. The bank discovered a surprising fact: younger UHNW cohorts valued self-servicing digital tools just as much as they did certain non-digital offerings like access to a dedicated investment committee and investment opportunities in private equity and closed-end funds. They also want to be involved in the investment process to exclude specific risks, sectors or themes from their portfolios. The bank responded with a hybrid experience of digital and non-digital features tailored to the needs of each client group.

Instead of price versus quality, pitch both

It is easy to assume millennials are price shoppers. We think they are attracted to robo-advisers because of the lower fees for instance. On closer examination, we find millennials are not necessarily looking for the lowest price. Rather, they are looking for quality at an acceptable fee.

In our survey, quality consistently ranked as the most important factor above convenience and brand, while price ranked lowest in millennials’ purchasing decisions. When the quality is right, millennials are willing to spend money for it.

Private bankers looking to attract millennials must deliver exceptional quality throughout the customer journey starting from a straightforward, easy-to-understand value proposition, all the way to the onboarding experience, sales interactions, digital tools, and pricing.

Simple, engaging and always available

Millennials want a groundbreaking private banking experience that will knock their socks off. Private bankers must be ready to initiate a cultural change and break old ways of doing things to deliver it.

For example, a common complaint from millennial clients is finding a banker with the right experience and expertise, with whom there is also a personal fit in terms of shared interests, personality, and work style. Instead of assigning bankers to millennial clients, one private bank introduced a banker matching tool. Clients swipe left to browse banker profiles directly on the app until they find the right match.

Another private bank introduced subscriptions or à la carte pricing where clients have the option to choose and pay for only the services they want. One well known private bank started evaluating pricing as part of its annual portfolio review, going so far as to propose money-saving alternatives to align with its millennial clients’ evolving needs.

Private banks must start mastering the art of attracting and retaining millennials if they want to remain relevant in the new world of private banking.

David Chung is a partner, Silvio Struebi is a managing partner and Simone Schuettel is a director at global consulting firm Simon-Kucher & Partners.