Advisory models for the newly minted rich

Brokerage and Wealth

Advisory models for the newly minted rich

Hybrid financial advice and science-based advisory models are the new callouts for wealth management platforms.

A changing economic fabric supported by a generational wealth transfer from baby boomers to millennials is underway. Born between 1981 and 1996, there are currently about 72 million millennials in the 24-39 years age group. With that new generation of investors taking charge of its finances, wealth management platforms, the provision of relevant advice and the delivery of services are witnessing a massive shift. Wealth managers, custodians and wealth management software advisors need to rethink and differentiate their offerings with science-based models to engage this new breed of investors.
More wealth in the hands of millennials
With entrepreneurship on the rise, many individuals have already hit many millions and even their first billion by their mid-30s and early 40s. Back in the day, it would typically take 30 or 50 years to build that size of wealth. Additionally, as baby boomers (those born between 1946 and 1964) are approaching retirement, there is an anticipated handing down of their wealth to the next generation. As per research by CB Insights, by 2030, millennials should control as much as $20 trillion of assets globally, and their parents are expected to pass on another $30 trillion by 2050 in North America alone. This transfer of wealth via entrepreneurship and inheritance is taking place in a very different age altogether. With more wealth at their disposal at an early age and easy access to global markets, this new generation of investors is very selective and demanding in its investment strategies. Not only do they conduct their independent research and seek out multiple sources of advice, they also don’t just rely on a standalone conventional advisor.
Information on the go
In yet another major shift, millenials demand for ‘anytime-anywhere’ access to their financial portfolios from those that manage wealth management systems. Millennials want this information on the go. Unlike earlier generations that depended wholly on standalone relationship managers, and were comfortable with wait times of 24-48 hours or more, this new breed of investors is conceptually different. Millennials don't want to call, chat or engage in conversations just to undertake mundane activity like checking a portfolio. They want instant access to their relationship managers. That is a crucial factor driving digitization, and unless traditional players come up to speed, they will be left behind.
Science versus human
A combination of artificial intelligence (AI) and machine learning (ML) technologies are giving way to robo-advisory services, virtual reality portfolios and the more advanced but yet-to-be-fine-tuned quant-based systems (a data-driven approach to managing investments). By tapping wealth management technology solutions providers for the right AI/ML tools and services, custodians can harness and mine client data from registered independent advisors (RIAs). Thus equipped, they could provide their clients wider and more refined choices of financial scenarios, portfolio simulations, portfolio rebalancing and risk assessments. With changing investor preferences, wealth management firms must become more responsive to customers by embracing newer technologies and digitization to create distinct offerings.


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