Wealth managers and private banks face losing trillions of dollars through inter-generational wealth transfer, and are challenged by technology and new investment trends. Only a few of them, however, are planning big changes to how they operate.

The large majority of Asian and European wealth managers polled in a new survey are holding fire on big changes to business models, even though wealth transfer, new technologies and investment ideas are buffeting the sector.

Firms aren’t looking to upend how they operate, in spite of how some expect money to leak out of the door as a result of inter-generational wealth transfer, a report, by Orbium and Accenture, said. (Orbium is part of Accenture Wealth Management.)

The study of 51 C-suite executives at private banking and wealth management firms in Asia and Europe found that 78 per cent of them in Europe and Asia don’t plan significant changes to their traditional business models. Collectively, respondents to the survey oversee $5.6 trillion of assets.

Wealth managers expect to lose, on average, nearly one-third (32 per cent) of their assets under management through intergenerational wealth transfers, equating to a staggering $40 trillion of investable assets over the next 30 years.

Large wealth managers will need to serve multiple generations of investors seeking tailored, digital services which fit their values, including impact investing and ESG-driven ideas, the report said.  

“Wealth managers must ensure that their advisory models are ‘fit for future,’ as the one-size-fits-all approach to client servicing no longer works,” Ian Woodhouse, head of strategy and change at Orbium, part of Accenture Wealth Management, said. “A younger generation of socially active clients is demanding new products and ways to be served, including timely, multi-channel interactions. This level of client engagement will require significant investments in technology around data and analytics so that wealth managers can restructure their business models to enable advisors to deliver personalized advice at scale.”

Growth
Growth areas for wealth managers may include non-bankable assets, such as direct equity, residential and commercial real estate, family businesses, art and passion assets - as well as non-investable assets like life insurance and pensions. These asset types represent growth opportunities of $78 trillion and $64 trillion, respectively.  

Respondents say that traditional ways of segmenting clients, such as by age, assets and region, will have to change. Only 17 per cent of the poll sample said that these categories will play an important role in five years’ time. At the same time, the market is likely to evolve towards a “segment of one” to reflect the individuality of clients’ wants and needs. Slightly more than half (53 per cent) of respondents believe that personalisation will be driven by traditional investment needs and evolving client choices.

“If wealth managers want to survive and thrive beyond these unprecedented times, they must focus on differentiation and innovation while maintaining their core mission of safeguarding clients’ assets,” Michael Spellacy, a senior managing director at Accenture and global capital markets industry lead, said.

“Their resiliency is certain to be tested, so they must overcome organisational inertia to reinvent the client experience and products for future generations. The leaders will make customised digital interactions more personal, with wealth advisors supported by artificial intelligence, automation and analytics to make better, faster decisions for clients,” Spellacy said.