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Millennials unconvinced of wealth management outcomes

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Almost one third (29 per cent) of the UK’s HNWIs under the age of 40 believe that recommendations from their wealth management firm have not been in line with their risk tolerance, according to new research.

This finding – which compares to a global average of 17 per cent – is drawn from Generation sceptic: Meeting the millennial standard, the third report in the 2015 Futurewealth series by NPG Wealth Management, SEI (NASDAQ: SEIC) and Scorpio Partnership.
 
The research takes into account the views of 3,113 investors from around the world with an average net worth of USD2.7 million and asks clients whether they believe their main wealth management firm has delivered on eight key outcomes.
 
It finds that the younger generation are less positive about the delivery of these outcomes than their older peers but that the weakness points vary across different markets. Under 40s from the Americas are most satisfied with their current service provider but 23 per cent of them still say they have not received explanation about how investment performance has been generated. In Europe, performance on this outcome is marginally better, with just 20 per cent of under 40s stating their financial provider had under-delivered in this area.
 
For both the under 40s in Asia-Pacific and the UK, explanation about how investment strategies can meet their financial goals has been weak with 29 per cent and 26 per cent respectively stating that this outcome had not been met.
 
Next generation clients are more sceptical about the benefits of regulation. Over one third of those under 40 feel that guidance will actually become less personal as the regulator takes further charge, compared to 26 per cent of the over 60s.

“Wealth management firms need to be mindful that younger clients are not as satisfied about the service delivery as their predecessors,” says Marc Stevens, CEO of NPG Wealth Management. “The implication is that institutions will need to work harder to understand the dynamics of this client group to ensure that the quality of outcomes does not slip. In particular, younger clients are much more information-hungry than their predecessors and require both education and mentoring.”
 
The research also highlighted that the engagement model for these clients is fundamentally different. Specifically, while 71 per cent of over 60s attribute responsibility for delivering a positive experience on client outcomes to either their relationship manager or their wealth management firm, just 25 per cent of millennials feel the same.
 
Instead, the under 40s are far more likely to view service responsibility as a collaboration between these two entities. Over 20 per cent of the younger generation believe that the responsibility for outcomes is split equally between relationship manager and wealth management firm, compared to just 5 per cent of the over 60s.
 
“The way that the next generation want to interact with their wealth management firms is fundamentally different from their predecessors.  Successful next generation strategies will require institutions to develop deeper alignment with the RM to ensure that these clients receive outcomes that meet these standards,” says Sebastian Dovey (pictured), managing partner of Scorpio Partnership.
 
Brett Williams, Managing Director, SEI Wealth Platform, UK Private Banking, says: “Our research demonstrates the importance of ensuring that wealth managers match engagement strategies to the needs of individual clients. Given that younger generations appear by and large less satisfied with the service they receive, many firms need to work harder to ensure they have a profitable client base to serve for many years to come.
 
“Effective engagement strategies are the ones that bring together a blend of human interaction and efficient technology. If wealth management firms get the basics right and remain close to their client they can build strong, sustainable businesses.”

The respondents cited the main reason for generating trust in their wealth management firm as the quality of products and services that they receive. Younger clients are also significantly more focussed on the robustness of security processes, with 30 per cent of European under 40s stating this is an important influencer over their trust in the firm, compared to 20 per cent of all respondents.
 
Wealth management firms also have a vital role to play in generating client confidence in their relationship manager. For 63 per cent of the UK’s wealthy, trust in a relationship manager is fostered by the quality of advice they receive and a further 52 per cent are given confidence by their expertise level, putting an onus on firms to recruit the right calibre of personnel.
 
While these elements are still significant for the younger generation, the under 40s also place more emphasis on their relationship managers profile on a professional networking site, as well as the credentials supplied by the business. A quarter of those from the UK under the age of 40 say that they generate trust in their relationship manager based on the information provided to them by their wealth management firm.
 

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