By Chitranjan Sood
Wealth management has remained a poor cousin to retail banking when linked to the application of digital in enhancing processes and client experiences. Older people, for the wealth they command have traditionally been a key segment for retention and growth strategy for wealth management firms. However with an increasing number of younger people joining the workforce, and older generation transferring wealth to their children, a new segment is waiting to be addressed.
The extent to which millennials rely on digital technology for daily tasks will drive wealth management firms to undergo major digital improvements to ease consumers’ lives across interaction touchpoints. Artificial intelligence, social media and analytics need to be used profusely to not only target the new consumer segment effectively but also bring about transparency and reinstate faith in wealth advisory firms.
Why millennials are too attractive to ignore
In India, millennials (aged 18-35) currently number 400 mn and account for nearly 1/3rd of the population, which is expected to grow to almost 42% by 2025, according to reports by Morgan Stanley and the UN. This segment is also a major beneficiary of transfer of wealth from older generations. Most importantly, behaviour and attitude on display by millennials are soon adopted by older people and it changes the entire marketplace – think smartphones and Ola, first used by youngsters and soon found audience among older segments.
As increasing number of youngsters grapple with repayment of education, car and housing loans, they will need an informed level of knowledge about needs and behavioural patterns of millennials is still inadequate. According to a KPMG global survey on investment management CEOs, 92% expressed inability to understand this segment and its evolving needs!
Reworking wealth management business model:
Wealth management firms have a huge opportunity to grow their business by fine-tuning consumer engagement strategy. Here are a few ways they can use to engage millennials effectively:
Hybrid robo-advisors: It seeks to provide best of both worlds to consumers by combining technology with human touch. In this, portfolio management is automated and financial advisor is just a call away. As per a study by MyPrivateBanking Research, hybrid robo-advisors are expected to grow by size to $3.7 trillion of assets globally by 2020.
Also Read: Wealth managers of the super-rich deliver best returns in Asia Pacific
Robo-advisors offer tremendous benefits: ensure lower cost since the process is automated, bring about transparency as it’s based on algorithms, suggest products based on the information provided by the consumers in the investment portal, etc. Millennials are comfortable with self-service mode of operations as it saves time, avoids bias and are in full control.
Perennial dearth of qualified financial advisers will also lead to more investments in robo-advisor capability. In fact, Morgan Stanley is planning to roll out robo advisor feature supplemented with social media and video chat for younger executives and children of its wealthy clients; it will also use machine learning engines to guide communication strategy for its financial advisors. Also, ICICI Securities already offer a robo-advisory platform called Track & Act that manages clients’ portfolio and provide suggestions on real time basis.
Analytics: Personalization supported by analytics will be vital in engaging consumers. It will be important to attune analytics to target life events to aid financial decision making at the right time. Providing intuitive mobile experience will also be vital since mobile is an important channel for product discovery and movement of assets for millennials.
Nearly 1/3rd of searches for investment products go through digital channels and it’s imperative to catch consumer at the very beginning of their investment journey.
Social media: Conversational commerce strategy will become increasingly vital as millennials are most active on social media and chat platforms. Purchase habits for this segment are being increasingly decided by social opinions. Traditional wealth management firms can follow the lead of Betterment, an online only wealth management firm that offers a messaging feature to connect consumers with the financial advisors.
Apart from that bots can also be utilized to address consumer concerns and keep them updated on their portfolio. TD Ameritrade, wealth management arm of TD Bank has started giving consumers instant updates on portfolio and trades through Facebook messenger chatbot
Traditional wealth managers have for long limited their outreach based on income level, however in view of the shift in spending power and influence to millennials, huge market opportunity lies untapped. Wealth management firms need to immediately appreciate the magnitude of rapidly evolving digital and business landscape.
All efforts must be made to enhance the understanding of millennials and develop the service model accordingly. Mantra of automation and connectivity is to be kept in mind when engaging millennials as this group is self-assured and never tired of options on offer.
Winners in this space will redefine the value proposition, identify needs using analytics and build perception as a digitally mature entity. A suave combination of technologies and services is needed to help these firms prepare themselves for a large scale disruption.The author of this article is Senior Manager of SapientRazorfish.