The new generations expect private banking to be sincere in their commitment, to change their practices in acts, and want to be more involved in the process of managing their wealth, these are some of the changes or challenges that three professionals: Manoel de Ipanema, (Lombard Odier), Sébastien Van Passel and Joan Vidal Fregola, (Member of CFA Society Switzerland) tell us about the relationship between private banking and the new generations.
Manoel de Ipanema, Senior Private Banker at Lombard Odier (Europe)
If we have a look at 2022, besides the war in Ukraine that has definitely been the most striking and dramatic event, one of the major themes has been climate change with the multiplication of extreme events: heat wave in western Europe that generated mega-fires, Ian hurricane in the United States and Cuba or floods in Pakistan that affected more than 33 million people.
New generations are particularly affected by this very negative newsflow and develop new forms of distress, called “climate anxiety” or “eco-anxiety”.
The phenomenon is not idiosyncratic: according to the study “Young People’s Voices on Climate Anxiety, Government Betrayal and Moral Injury: A Global Phenomenon”, published on thelancet.com/planetary-health, on a sample of 10,000 children and young people (aged 16 – 25 years) in ten countries, more than 45% of respondents said their feelings about climate change negatively affected their daily life and functioning.
One of the consequences is the need for an urgent call to action that can lead to tough discussions and sometimes radical actions towards those who represent the “ancient world”: older generations, governments, companies, banks, etc.
As several Neobanks now highlight the huge Co2 impact of cash deposits in Banks (through the projects they finance), there is a growing conscience of the role money has to play in the climate transition.
New generations expect Banks and Private Banks to be sincere in their commitment, change their practices in acts (not just words), and truly participate in the transition. They also want to be accompanied by bankers who will educate them about sustainable investing without denying the “work in progress” scheme and above all, be a guide to help them invest with a positive impact.
Sébastien Van Passel – Private Banking expert
In Private Banking, the evolution of our relationship with new generations is representative of how our environment evolved since the beginning of the Century. The private Banking sector had to face more constraints linked to the regulatory rules (AML, KYC Investor Profile, etc.) the advent of new technologies, and the development of more responsible investment solutions (ESG).
It is also important to emphasize that most of our young customers are members of trustful families. Of course, there are some exceptions, like football players or young entrepreneurs but they represent a minority of our customers in the European Market.
For that reason, an increasing number of Private Banks and Family Offices are targeting that new generation of customers through their own “young private banking academies”. The objective is threefold, they invest in the continuity of their relationships, this is a smart way to understand their specific needs and, as a matter of fact, if you meet them regularly, you can also create a strong relationship with the new generation.
From the young generation’s perspective, generally speaking, those customers are more demanding in terms of availability and reaction time. They also like to understand how their assets are invested, even though they don’t want to sacrifice their return on a long-term period. That new private banking generation is also clearly seduced by specific services like safe and smart applications to consult their assets, virtual safe boxes, or other integrated services like an online brokerage.
Beyond this general trend, we never have to forget that every customer is different. We can meet conservative young people and elderly geeks. That is why private banking was and will be a tailor-made business.
In summary, to successfully deal with the young private banking generation, continuous trustworthiness and adaptability are key.
Joan Vidal Fregola, Investment Advisor, Member of CFA Society Switzerland
How the greatest asset transfer in history is reshaping wealth management.
According to various studies, approximately two-thirds of wealth is in the hands of the “boomers” (people currently aged between 58 and 76 years). Over the next two decades, this wealth will be transferred to later generations, the so-called “next-gen”. Wealth managers are adapting their offerings to attract and retain this new generation of clients.
If we were to draw up an outline of next-gen clients, it would look like this:
Unlike the boomers, who declare themselves sufficiently satisfied with the classic portfolio composed of bonds and stocks in different proportions, the next-gen is much more attracted to alternative assets such as Private Equity, Hedge Funds, and art and collectibles as investments. Recently, they have also been embracing cryptocurrencies and NFTs in their portfolios.
Secondly, the next-gen shows a clear seek-purpose-as-well-as-returns attitude and shows greater confidence in the positive impact of ESG investments on society, and hence has a higher propensity to invest in sustainable investments. This attitude is also reflected in philanthropy activities where the next-gen prefer to establish their own philanthropic identity, differentiated from that of their parents.
Finally, the form and channel through which communication takes place play a key role. The next generation expects to be more involved in the process of managing their wealth and looks to wealth managers for strategic advice. Communication methods are crucial for this new generation, they expect a high degree of transparency and access to information at any time. Wealth managers must adapt to the lifestyles of their clients and offer them a palette of digital and physical experiences to choose from.
The opportunity for the industry lies in becoming a true one-stop-shop for the wealth management needs of HNWIs. Advisors who are able to mobilize a broad range of skills – from wealth planning to specialized lending – will have a great opportunity to generate added value and build stronger relationships with next-generation clients. To achieve this goal, the use of technology will play a key role. The application of artificial intelligence and machine learning will be a game changer by enabling, for example, the instant generation of hyper-personalized recommendations while complying with complex financial regulatory regimes.