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Hybrid Wealth Management: The Merging of Human and Machine

In a recently completed study commissioned by Forbes2, the relationship that younger investors have with technology will need to be accounted for if advisors hope to develop lasting client connections.

 

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Hybrid Wealth Management: The Merging of Human and Machine

Hybrid Wealth Management: The Merging of Human and Machine

According to a survey by PwC1, asset attrition rates exceed 50 percent for intergenerational transfers. To improve, advisors will need to have a strategy for winning the hearts and minds of Gen Xers and Millennials—and, it better be soon. PwC calculates that by 2020, they may control more than half of all investable assets.

The New Advisor-Client Dynamic—Helping Advisors Succeed with Millennials and Gen Xers

Baby Boomers were a boon to wealth management, but as accumulation transitions to distribution and wealth transfer, the new accumulators have become Millennials and Gen Xers. They arrive with a different set of expectations.

In a recently completed study commissioned by Forbes2, the relationship that younger investors have with technology will need to be accounted for if advisors hope to develop lasting client connections.

The best news from this research was that, while Millennials and Gen Xers want to make their own decisions, they do want to work with an advisor as a resource to obtain a second opinion or to validate their view.

Most investors are comfortable with the digitization of wealth management services, with 62 percent saying. “It’s good overall, but I still want to meet often with my advisor.”  Seventeen percent said that it was essential, while 10 percent didn’t like it or were frustrated by it.

There is a sharp disconnect between clients under age 50 and their advisors that may lead to relationship blind spots. Note the gaps between why a client would consider leaving and the reasons that advisors believe a client leaves in the table below. Inadequate technology is not as inconsequential to younger clients as advisors believe.

Reason for Leaving

Clients < 50: What would prompt you to leave your advisor?

Advisors: Why do clients leave your firm?

Poor performance

59%

39%

Departure of key staff

45%

30%

Lack of transparency/control over portfolio

34%

28%

Technology used by advisor is inadequate

31%

13%

Note: Numbers add to more than 100 percent because multiple reasons were allowed.
The study also highlighted some key generational differences that may help advisors succeed with Millennials and Gen Xers. Their trust in institutions is very low. Consequently, they look to family, friends and social media to help them select an advisor. For 65 percent of investors under the age of 50, an advisor’s social media presence is either “important” or “highly important.”Note: Numbers add to more than 100 percent because multiple reasons were allowed.

They also expect you to educate them, with 77 percent saying that education is either “important” or “highly important.”

Much like “The Silent Generation” gave way to Baby Boomers, the time has arrived for new generations to take center stage. Advisors will need to adapt to this demographic inevitability.

Sources:

  1. http://www.strategyand.pwc.com/trends/2016-wealth-management-trends
  2. “The Rise of Bionic Wealth” Forbes, in Association with Temenos, 2016.

See referenced disclosure (2) at http://blog.americanportfolios.com/disclosures/ 

About The Author

Kenneth Aulbach

 

Vice President of Sales 
800.889.3914, ext. 344 

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