Wealth management firms lack the requisite tools to cater to the next generation of high-net-worth investors (HNWI) set to inherit USD83.5 trillion dollars by 2048, a report by the Capgemini Research Institute finds.
A survey of 6,472 HNWI across the globe finds the next generation of investors expect their wealth managers to deliver “highly personalised, multi-generational, geographical and asset advisory services”.
However, most firms “lack the advanced tools and integrated technologies to support this need”, which limits relationship managers’ ability to deepen client relationships and fully capture the wealth transfer opportunity.
The research finds that almost half (47 per cent) of relationship managers are dissatisfied with their firm’s digital tools and technologies.
Vivek Singh, Head of Banking for Capgemini Research Institute for Financial Services, says: “The defining trend is the unprecedented transfer of wealth to Gen X, millennials and Gen Z or next-gen investors. This multi-faceted HNWI segment has distinct investment priorities, a strong preference for digital engagement and an expectation for personalised valued-added services. Many firms are not adequately equipping them with the necessary tools, agentic AI capabilities and support.”
Singh says this gap will lead to client attrition and a potential talent crisis within firms as relationship managers seek environments in which they can cater effectively to their clients’ needs.
The report finds 81 per cent of next-gen HNWIs plan to switch from their parents’ wealth management firm within one to two years of inheritance. Further almost half (48 per cent) of relationship managers say they plan to retire by 2040.
“By creating a unified next-gen platform and embedding AI and analytics across relationship manager workflows, wealth management firms can mitigate these risks and empower staff to drive loyalty among next-gen HNWIs, and ensure sustainable growth,” Singh says.
The research also reveals a bigger appetite among next-gen investors for alternative and crypto assets.
Almost nine out of 10 (88 per cent) or relationship managers surveyed say their new generation of clients are more interested in private equity than their predecessors, while a Bank of America survey finds that 73 per cent of younger investors do not see bonds as a viable source or outperformance.
However, the research from Capgemini finds wealth managers are falling short in meeting demand for emerging assets. For example, two-thirds of relationship managers surveyed say they lack investment opportunities in crypto.
Morgan Stanley is one of the few firms offering bitcoin ETFs to private investors with at least USD1.5 million in net worth and who exhibit a high-risk tolerance.
Meanwhile global regulatory reform – including the European Council’s regulation on markets in crypto assets for HNWI – in digital are improving transparency and enhancing investor protection.
“These efforts indicate a growing trend towards integrating digital assets into traditional wealth management strategies, offering more diverse investment opportunities for HNWIs and institutional investors,” Singh says.
