The ‘IT’ factor in managing the great wealth transfer

This is an undisputed fact that wealth disperses if not properly managed. Research constantly confirms this.

The ‘IT’ factor in managing the great wealth transfer

This is an undisputed fact that wealth disperses if not properly managed. Research constantly confirms this.

According to the Williams Group wealth consultancy, for instance, 70% of wealthy families lose their wealth by second generation and an incredible 90% by the third.

Private banks have a once in a lifetime opportunity to assist existing millionaire clients with their succession plans as well as capture a huge base of new assets.

According to some estimates – and this varies widely – this largest-ever wealth transfer will see over $16trn changing hands in the next 30 years globally.

Additionally, this is not only an age related transfer. This also entails wealth transfer from spouse to spouse. This requires attention, planning and expertise.

However, alongside opportunities, there are implications of this wealth transfer that are challenging for private banks.

However, alongside opportunities, there are implications of this wealth transfer that are challenging for private banks.

Unfortunately, a majority of private banks globally are not fully prepared to tackle this great transfer of wealth. Firstly, while private banks’ core client base is aging and their needs are changing, money and legacy are not topics these clients easily discuss – even with their own advisors – leading to a lot of wealth being lost due to the lack of professional planning.

By the time these clients start discussing succession, it’s already late. Many wealth managers risk missing a critical window of opportunity with their current client base where they can start these conversations and inform as well as guide their clients to fool- proof their future.

Secondly, and this is a point that wealth managers have understood only so well, younger clients have drastically different attitudes and behaviours. They are digital inatives, expect transparency and control, and they are not easy to please. They also have a high propensity to use automated advisory services.

Private banks and wealth managers need a mindset shift to cater to the demanding and conscious next generation as well as appropriately cater to the changing needs of the current generation.

They need to deepen the array of services and scope of engagement to remain competitive with nifty new fintech players as well.

This is where digital maturity goes a long way.

Gaining digital maturity for private banks is not about having a good mobile application and website. It’s a lot more. It is ensuring that a digital backbone runs across the entire value chain of the bank, empowering both the staff and the clients with seamless experiences and capabilities.

It means an all-round robust IT architecture, harmonised data management frameworks, advanced analytical tools, high levels of straight through processing, and products and services provided to clients through any channel they like at any time they like.

This is all easier said than done. Big IT rejuvenation plans need bigger investments and management roadmaps.

There is certainly a cost to this digital maturity. However, the cost of digital immaturity is much higher.

It is high time private banks understand that and act accordingly, particularly since that $16trn amount has already started trickling through.