Private Banks must address next gen needs to survive

The transfer of intergenerational wealth is "reshaping the wealth management industry"

The transfer of intergenerational wealth is “reshaping the wealth management industry” – with the next generation demanding a hybrid between sophisticated technology offerings and personal advice, and private banks being plagued by low client retention rates when the transfer of wealth takes place, reveals new research launched at the Temenos Community Forum (TCF) 2016 in Barcelona. John Schaffer reports from the event


Research conducted by Temenos and Forbes Insights reveals that the transfer of intergenerational wealth is “reshaping the wealth management industry”, with next generation clients requiring a hybrid between technology and personal advice.

The report, The rise of bionic wealth, surveyed approximately 60 wealth managers and 35 high net worth (HNW) clients. The findings were launched at the Temenos Community Forum (TCF) 2016 in Barcelona.

Two thirds of the surveyed HNW clients favour the digitisation of wealth management services, but still want to have personal access to an advisor. Conversely, only 40% of wealth managers believe that a mix of technology and human interaction is ideal, according to the findings.

Gregory F. Gatesman, COO at Julius Baer Group, said in conjunction with the report:

“Discussions related to portfolio and asset allocation strategies are almost all virtual communication at this point.

“We still see the desire for in-person interaction, even in the younger generation, on the planning level. When clients are ready to sit down and talk about three, five and 10 year time horizons, the face-to-face meeting is still often very valued.”

The report indicates that the requirements of HNWIs are fast changing. Surprisingly, 20% of HNWIs ranked the social media presence of their wealth manager as important – amidst the expected priorities of insights on financial markets (31%) and level of experience (31%).


Low retention

According to the report, 50% of private banking clients are lost when the transfer of wealth takes place, in some parts of the world retention is only 5%.

Bruce Rodgers, chief insights officer at Forbes, says that a third of clients leave over a lack of transparency, and tend to migrate to other private banks that have technology available to make information more visible.

Rodgers adds that although “fintech is driving transparency”, disillusioned clients tend to still favour private banks over fintech wealth management alternatives.


A potential Robo-monopoly?

The research presented mixed results for the success of robo-advisors. It revealed that one in five of the surveyed HNWIs were completely unaware of robo-advisors whilst 30% suggested that robo-advisors were essential and the best way to manage a portfolio.

Assets under management (AuM) for robo-advisors are set to increase by 68% annually, reaching approximately $2.2tr in five years. Rodgers adds that although this would only represent a small portion of the wealth management industry, the growth of robo-advisors would be “exponential” going forward, and should be seen as a serious threat.

Rodgers added that, in the future, either private banks will buy out robo-advisors – a trend that has already begun – or robo advisors will start to offer personal advise – in a bid to disrupt the tier-1 private banks.